There is no limitation to how frequently you can refinance your home. Do it as often and freely as you like as it financially makes sense to do so. Following are some things to consider when pulling the trigger…
Closing Costs
Are you throwing good money after bad? If you recently paid fees on your last mortgage, you may lose out on the fees paid originally refinancing again just a short time later. A big payment reduction or a lender credit refi scenario can help make things pencil.
Early Payoff (EPO) – An early pay off is not to be confused with a prepayment penalty. A prepayment penalty is a condition of your loan that will not allow you to prepay any of your principal without incurring a penalty before the prepayment penalty time frame is up. An early payoff is an incurred expense to the originating mortgage company on a loan that only lasts on the books for just a few short months. The amount of the penalty generally in the mortgage industry is six months, but can be as short as three months. One caveat to this may be working with your original lender as they can typically absorb any early payoff fee.
Mortgage Tip: mortgage companies know financial circumstances change as does the needs for homeowners to borrow money. If your financial circumstances have changed, it is your right as a homeowner to refinance your house.
Impound Account Monies-If you are refinancing your home from February 1 through April 10 or from October 1 through December 10 first installment property taxes are going to be accounted for on your loan estimate at the closing table. Let’s say for example you bought your home in June. That same year interest rates dropped and you decide to refinance your house, just few months later. Your closing is slated for November 1; as a result, your escrow company is going to collect for first installment of property taxes even though they are not due until December 10. Title/escrow companies are required to collect for first installment and or second installment of taxes when refinancing within those calendar months. The previous loan transaction you may have completed earlier in the year may not have collected for a tax installment, plan accordingly.
TILA-RESPA Integrated Disclosure Rule (TRIDD) was your last mortgage transaction before October 1, 2015? If yes, plan on a different mortgage loan closing process. The Consumer Financial Protection Bureau’s most recent change to the closing process now requires a borrower to be more involved in the process. The closing process requires borrowers to e-consent to various mortgage consumer and financial disclosures within the application time frame. Additionally, a closing disclosure is sent by the lender to you three days before final settlement, which also must be acknowledged and executed online. While these changes are meant to make it easier for a borrower, some might find the process of consenting to online disclosures a little irksome. It’s the new way mortgage loans are originated.
Factors to evaluate:
- Housing market-your home may have appreciated in value enough from the last mortgage transaction thereby moving you into a different loan to value parameter and subsequently creating a financial opportunity.
- Loan purpose-if you previously did a cash-out refinance in excess of 417k, you might benefit by refinancing again into a rate and term refinance. On loan sizes greater than 417k there is a substantial pricing difference from a cash-out refinance loan to value requirement versus a rate and term refinance loan to value requirement.
- Rates-even as a little as .25% reduction in your interest rate can make a difference- negotiate with the lender to pay your closing costs, and you’re benefiting.
The decision to refinance is entirely upon you the consumer to make a sound choice. Furthermore, a best practice is to stay in regular communication with your preferred lender. Checking in every six months is worth the effort as interest rates are always in flux and underwriting is slowly beginning to loosen.
Looking to possible refinance your home? Begin with a free custom quote from Scott now.
