[quote=arv]Following similar strategy and I am able to refinance two times with negative points receiving around 3K and reducing rate at the same time. The only way to receive funds was opening an impound account with lender.
Not sure if there is a clause which can limit refinance frequently to leverage current mortgage environment this way.[/quote]
OK guys n gals, so I’m back again trying to get my head around this free lunch I’ve found. Arv, I think you and I are onto a winner here.
In October I refinanced and *effectively* made $3k profit from it. I also refinanced from a 30-year to 15-year fix at a lower rate but the loan duration and interest rate on the loan were not of concern to me, as I am intending to refinance again as soon as I can (every ~3 months ad infinitum).
Here are the rough numbers on the refinance:
$403k (mortgage payoff to original mortgage)
$403k- (new mortgage loan)
$5k- (net lender credit)
$2k (fixed closing costs: appraisal, title, fees, etc)
$4k (prepaid and escrow items: interest for partial first month, property tax escrow) – note: I don’t consider these true “costs”.
$1k- (cash required from me at closing)
So, I refinance, pay $1k upfront, then a few days after my original mortgage is paid off, I receive a check from my original mortgage servicer for ~$3.5k for the escrow I had with them, plus ~$0.5k left over from the mortgage payoff (which they presumably overestimated to ensure they get enough payoff money to cover additional interest if payoff is delayed).
Therefore, my net profits from the refinance are: $3.5k + $0.5k – $1k = $3k.
I just did it again in January, refinancing back from a 15-year to a 30-year and got $4k back this time. Again, the loan duration and interest rate on the loan were not of (material) concern to me, as I am intending to refinance again as soon as I can (every ~3 months ad infinitum).
If I can do this 3 more times this year, I’ll have netted ~$16k. tax free.
Known risks/issues include:
1. I’m continually effectively adding on 3-4 months onto the life of my mortgage every time I refinance – I realize this but my net wealth increases with each refinance. That’s all I care about. I have savings and investments elsewhere.
2. Rates might start increasing materially – in which case I might just have to decide to stop my merry refinancing dance.
Does anyone else have thoughts on this? Who is losing out here? Is it the purchaser of the mortgage asset (Freddie/Fannie), who was expecting a nice 30-year income stream only to have me pay it off after 3 months?
Have I really found a free lunch or am I missing something and actually on a riding for a hiding?
