Did you know that you can refinance your mortgage just after buying your home?
Most people think you need to wait, anywhere from 6 months to a year, but Fannie Mae and Freddie Mac, the two government sponsored enterprises have no waiting period.
So if you just bought your home and took out a 7% interest rate, you can do a refinance that very month… we call that a do-over mortgage.
Conventional wisdom is that you should wait to refinance your mortgage after purchasing your home.
The thinking is, you just paid a bunch of fees to buy the home and it was stressful, why go through that again?
Here are 3 reasons we may want to consider refinancing soon after buying:
No. 1: You’re not restarting the clock
Since you’ve just purchased your home you haven’t made a bunch of payments so you’re barely restarting the click.
For example, if you took a 30 year fixed to buy, made 2 payments, and are now refinancing to a new 30 year fixed, you’re only restarting the clock by 2 months.
This is important because mortgage sales people will trick homeowners to think that the savings from the refinance is calculated by the savings between the existing payment and the new payment. But that is so wrong! Don’t fall for it people.
Part of the savings may be from the lower rate, but also the savings is from restarting the amortization period.
For example, if you’ve paid 3 years of your mortgage, and refinance to a new 30 year fixed, you’ll end up paying more interest just by restarting the clock.
Now some homeowners may prefer to restart the clock at 30 years, but it’s important to separate which savings are derived from the lower rate, and which stem from re-amortizing. Because the latter is not really savings.
Additionally, you may be able to use the appraisal from the purchase which decreases the fees.
No 2: Yourgage
Most lenders offer standard fixed terms: 30, 25, 20, 15, and 10.
With SELFi marketplace, we can offer any year term. We call this Yourgage.
By selecting an odd term, it keeps you on the same amortization schedule or can actually push you ahead of schedule.
For example, let’s say you’ve made 4 months of payments and want to take advantage of the low rates through our DIY Refi® but you don’t want to back to a new 30 year fixed.
We can set the loan term to 29 year fixed rate.
This enables you take advantage of the lower rate, potential lower payment, and pay off your mortgage faster. Winning combo!
No 3: Paying Points
When you buy a home, the mortgage is secondary focus to the home itself.
Most people just end up financing the purchase with their bank or high-priced lender that was recommended by their realtor.
When you refinance, the mortgage is the focus.
Now that you’ve moved into your home, you’re in a better position to evaluate the best mortgage option.
If this is your forever home, then perhaps paying points on the refinance makes more sense.
“Set your loan term: We call this Yourgage.“
Your ability to refinance is a big advantage of being a homeowner.