Refinance immediately after closing

[Kajal Aggarwal]

Hi All,

I closed on a property last week and the loan I got was 7/1ARM at 4.125%. The purchase price is 1.5M and loan amount is 1.2M. I had to agree for the higher rate under stressful situation as I was running out of time to close. But the higher rate has been bothering me.

Another loan officer suggests to refinance immediately and he is offering 7/1 at 3.875% and no-cost loan. Is it ethical to refinance immediately after closing? I would save $173 per month in the payment. 

[Jeff Dulla]

@Kajal Aggarwal Did the lender who helped you close on the purchase do anything unethical or wrong to you? Did you feel coerced or anything like that? If so then maybe you have an ethical reason to proceed and I wouldn't argue with you at all. 

In my opinion, the new lender offering you that is doing something frowned down upon and at the very least has some karmic retribution coming his/her way. The reality is that if you refinance and close within the first 4 to 6 months after closing on the purchase, the lender who helped you with the purchase will forfeit 100% of the commission/revenue the company earned on the loan. The servicer will come back to them and tell them they need to pay back 100% plus any lender credits. It is a huge deal. And of course the new lender wants you to do it because they are going to get paid a decent amount. 

If you move forward with that, the lender who helped you with the purchase would have been much better off dropping your loan mid process and encouraging you to go with another lender who may or may not have got the loan done in time. 

Hopefully this helps.