Last refinance they kept the mortgage in house. I almost felt like Jimmy Stewart in It's a Wonderful Life. How often does this happen anymore? I have gotten tired in the past of trying to track down my mortgage holder (same with my student loan earlier).

Could the paperwork have already been prepared? If there were points for origination fee and buying down interest rate, the bank would get less dollars for the loan.

As far as the mortgage, you could kick in the 5% in the first payment. Disadvantage is that your payment amount would be higher per month, but the advantage is that the loan would be paid off sooner.

Also you get interest rate breaks for higher amounts for your mortgage. For example when I refinanced my house to get a lower interest rate, I did $100K (actually owed less), but this gave me a lower interest rate. Could you be at one of those break points?

What you do with your finances should be no business of the loan company. Usually they only care about the credit rating and whether the appraisal comes in at the needed value. It seems unprofessional to me even.

Maybe it has certain criteria in mind to meet in order to sell the loan. Maybe this bank is interested only in a quick buck. It pays to shop around.