I just wonder why someone would repeatedly refi just to shave .125% or .25% off their current interest rate (especially if they didn’t need to take any cash out) and then shortly thereafter retire the loan! I mean, what’s the point? How much did they really save on their mortgage over their entire period of ownership . . . especially if their mortgage was continually or even on some occasions reset back to 30 or 15 years upon successful refi?[/quote]
It’s actually a BRILLIANT strategy to refi about 6 months before paying off a loan with a high balance….
6 months is a reasonable amount of time to say my life changed, I’ve decided to pay off my loan. (Nobody is going to ask)
Credits are always a % of the loan amount, there are more dollars available (and easier to get no cost) with a higher balance.
On a $200K loan, you could get anywhere from $1000 to $4000 and a 400K loan double that.
Pay $40 a month more for 6 months, get a few thousand dollars! That’s the point…. Very few people do it OR even understand they can do it.
Does that make it a loophole?.
I’m not clear on why you keep bringing up reset of a mortgage when you stated that you know payments
can be adjusted. Reset is only one option of a refi.
Those who understand adjust their payments accordingly.
the MINUMIUM payment ALWAYS resets a loan. Adjusting payments will change the term.[/quote]So, HLS, you’re essentially saying here that it’s worth it to go thru the laborious motions of refi when you have plans to retire the mortgage in the near future, just to receive the cash back at closing. In order to get the max cash back at closing, you refi at a slightly higher interest rate cuz that will yield the borrower a higher cash back amount at closing. The borrower doesn’t care if they are making a slightly higher payment than they would have had they taken out a zero point mortgage cuz they plan to only make a few payments before paying it off.
Um, HLS, how long have these deals been going on? If it’s been longer than a few months, why haven’t lenders become wise to this practice? Whatever happened to the prepayment penalties (typically 3 yrs) that all fixed mortgage products used to have in their docs? Why would lenders let this practice continue to go on without protecting themselves? And how can they survive repeatedly originating these kinds of mortgages and still pay a respectable YSP to the procuring broker? What am I missing here, HLS??
This practice is sort of akin to a new vehicle buyer with good credit planning on paying all cash for a new vehicle when they walked into the dealership but ended up applying for a “0% interest auto loan” offered by the vehicle’s mfr because the dealer offered them an even better deal on the vehicle if they do so. So they take out the 0% loan and make 1-6 monthly payments (just long enough for the dealer to receive their kickback for bringing in the loan from the vehicle mfr) and then pay the vehicle off.
Those that don’t need credit at all are the ones who are being showered with credit offers left and right (they go right into my shredder) …. and usually under the best terms …. terms beyond unimaginable in past decades …. That’s the way it’s always been :=0
Joe and Jane 6p working stiffs with a 640 FICO score (they’re youngish and still trying to build their credit) can’t borrow enough mortgage to buy a home in a coastal CA county or even get a credit card on decent terms. A lot of folks in this group are undoubtedly still using secured credit cards and branded debit cards for everyday purchases.
When do you think the “reward the borrower” party will end, HLS? Or will it??
