Rental Property Investor · Los Angeles, CA · Member since 2018 · 25 posts · 5 votes
I just completed a cash-out refinance and in the process of shopping around for another mortgage when I realized something. Since cash-out refinances typically have a higher rate, would it make sense to immediately do a rate & term refinance into a lower rate? Are there any restrictions against doing something like this?
I just completed a cash-out refinance and in the process of shopping around for another mortgage when I realized something. Since cash-out refinances typically have a higher rate, would it make sense to immediately do a rate & term refinance into a lower rate? Are there any restrictions against doing something like this?
Interesting question. You'll want to make sure there is no prepay penalty, and it probably comes down to what seasoning is required.
You will want to see what kind of closing costs you are incurring doing that, because after paying closing costs on 2 loans back to back you may not save a whole lot.
Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes
7y
@Jason L. - there's a very good chance that you will lose money by refinancing again. It costs money to refinance, so that must be factored into the equation. The difference between a cash-out and rate/term is small. Maybe 1/2 point. If you see a big change in rate, it's likely do to mortgage rates moving as opposed to you selecting rate/term. Bottom line: determine your breakeven - divide the cost of the refinance by the amount you'll save each month (this is actually a simplification) and the number you come up with is how many months to break even. At that point you'll know if it's worth refinancing.
Rental Property Investor · Los Angeles, CA · Member since 2018 · 25 posts · 5 votes
7y
Thanks for the replies. The main reason I am considering this is because I found a new lender through my company that offers almost a full point difference. Maybe I can bring this to the current lender (Chase) and see if they would be willing to change the rate/terms on the existing loan for a small fee since they don’t have to redo the underwriting and appraisal process? Has anyone ever modified a loan within the first few months?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Jason L. if you JUST got a loan and another lender is bragging about beating that rate by 1 point....that would be VERY unusual. We don't know all of your details here but make sure you receive a Loan Estimate before you commit. The loan estimate will show all of the FEES to the loan. In theory, every lender can beat every lenders rate...if you pay more fees. Just see those fees to make an educated decision.
Rental Property Investor · Los Angeles, CA · Member since 2018 · 25 posts · 5 votes
7y
Seems like rates really did drop, so I am seriously considering doing this now. Anyone know whether refinancing with the same lender within a 3 - 6 month period is going to be a good/bad idea?
Seems like rates really did drop, so I am seriously considering doing this now. Anyone know whether refinancing with the same lender within a 3 - 6 month period is going to be a good/bad idea?
Well first off the current lender may not like that as their EPO or early payoff period is probably 4 months of mortgage payments or 180 days. If you payoff the loan too soon you may find yourself not getting too good of service from that lender going forward since they just did all that work for nothing, aka they got their commission charged back from them.
Aside from the professional courtesy to your prior lender the other issue might be another round of closing costs which are about 3200 -3500 dollars for the regular non reoccurring closing items (lender fee, escrow, title, notary, processing, recording, etc). This does not include points or prepaid tax/insurance/interest till the day of closing.
If you can in theory get a lower rate and a LC (lender credit) greater than the 3200 figure above you can possibly do whats call a no cost loan (its not really no cost it just gives a LC at the expense of a higher rate but if that rate is lower than your current rate its a no-brainer).
Rental Property Investor · Los Angeles, CA · Member since 2018 · 25 posts · 5 votes
7y
Thanks for your reply Albert. I already received a quote from another lender for no cost refinance at 0.75% lower than my current rate. That said, I also considered the professional courtesy side of it and plan to offer the current lender the opportunity to do a terms modification. Thanks!