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Imagine that:

  • One buys a home at an interest rate, for example 3.625%
  • Several days after closing, interest rates have dropped to 3.4%

The timing is rather unfortunate here. Is there any way to easily use the fact that the home was appraised and you were previously approved for a mortgage to easily refinance to the lower late?

I'm not sure if you can "reuse" things like the recent appraisal or underwriting process. It would be great to be able to cheaply refinance to the lower rate, but I don't want to have to pay $2000 or "standard" refinance fees.

Is there any way to do this relatively inexpensively? Or did I just get unlucky in my timing?


Note: I'm not really looking for commentary about how good my rate is or whether or not the fairly nominal savings is worth it. I know the rate is still historically low. I know it's "only" $24/month, assuming I go to a 3.4% mortgage.

But from my perspective, I want to know what options for a potentially cheaper refinance would be, given that I just bought a house it feels like it would be useful to investigate.

  • 6
    Unfortunate? Hardly. Have you done the math? A 150k, 30-year loan will cost only $19 less per month which equates about ~$6700 over 30 years. Forget about it an go to bed at night knowing you've snagged among the best mortgage rate in the past 45 years. If you wake up and the rates are 2% tomorrow morning then cough up the 2k and refinance ASAP. – MonkeyZeus Jul 13 '16 at 18:13
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    @MonkeyZeus let's pretend that you had the option to pay $24/month for 30 years (not $19, given my loan)... or $0/month for 30 years. The only requirement is the second option requires some research, effort, and time on the phone. What option would you pick? I don't care that I have nearly the best rate in 45 years. What's wrong with wanting to put some slight effort in to find out if I can save that $24/month for the next 30 years? – enderland Jul 13 '16 at 18:22
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    @enderland, If you want to optimize this perfectly, then pay the $2000 and refinance. You may do that again in six months if the economy doesn't improve, and six months after that. It is hard to optimize to the last dollar on a $150,000 purchase. Because rates are always changing, it is unlikely in the general case that you will pay that $24 for 30 years. And the 3.625% rate you found wasn't the best rate you could have gotten - it was the best rate you could find in the time you allowed yourself to search. – user19474 Jul 13 '16 at 18:48
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    @8protons The thought of that makes me shiver. "Hello sir, we are charging 12% for our loans as of today so let's get you refinanced to our benefit." – MonkeyZeus Jul 13 '16 at 21:03
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    Bear in mind that you are almost certainly NOT saving the monthly difference in the mortgage payment times 12 months times 30 years. The chance that you will stay in this house and continue to pay this mortgage for 30 years is very small. If you saved $24 per month as you say, and a new closing cost $2000, then it would take 84 months, or 7 years, to break even. Are you going to stay in this house for 7 years? And what would you do with the $2000 if you didn't refinance? – Jay Jul 14 '16 at 13:55
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If you can find a sufficiently better rate somewhere -- rule of thumb has been 1% cheaper -- paying another set of closing costs in order to refinance into the cheaper loan becomes worthwhile.

To determine if this is worthwhile, the easiest solution is to get the details on the loan you are interested in and plug those into the refinance calculators mist banks now provide on their websites.

If rates drop by that much across the entire industry, and you have a good history of paying on time, your lender may be sufficiently interested in keeping you as a customer to let you "refinance in place", which avoids most of the additional closing costs and makes this almost a no-brainer. Ask them after you have researched the alternatives, so you can credibly say that if they can't accommodate this request you plan to go elsewhere.

Otherwise... You're already getting what would historically be considered an amazingly good rate. (My first mortgage was at 6.5%.) Don't let the fact that someone else got a slightly better deal spoil your enjoyment of that.

(Late addition: Note that you could get a variable rate mortgage, which tracks changes in the prime rate. That is obviously a gamble, and is not one I would take at this time.)

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    This is a good point - keep in mind the difference in monthly payments between 3.625% & 4%, over a 3 year fixed term, comes to about $17 per month, for every $100,000 of the mortgage. Totals to about $600 over the 3 year period. Not nothing, but not a lot. – Grade 'Eh' Bacon Jul 13 '16 at 17:03
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    The questions are (a) is the bank likely to refinance-in-place this soon (probably not) and (b) will refinancing Dave more than a new set of closing fees will cost (lots of calculators our there, run the numbers, probably not). Doing nothing may in fact be the best choice available. Or may not be. Do your homework; we can't do it all for you. – keshlam Jul 13 '16 at 19:33
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    C/Dave/save/ in previous. I wish SE wasn't so paranoid about edits... – keshlam Jul 13 '16 at 20:11
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    @enderland well yes, it is money, but you need to consider how "inexpensively" the bank would need to be willing to do this for you, in order for it to be worth it. If you can find a bank to do this for $700 (about $20 / month without factoring interest), then you would have earned a whopping ~$100 net. Of course, you have to pay the full $700 up front and then earn it back $24 at a time... – Grade 'Eh' Bacon Jul 13 '16 at 21:05
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    @Grade'Eh'Bacon the whole point of this question is determining if the answer is, "yes, you can fairly easily do this" or "no, you cannot." If I knew that answer I wouldn't have asked this question in the first place. – enderland Jul 13 '16 at 23:26
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I think the problem you are having here is that you are applying logic to a process that is kind of set in stone. You might find a loan agent that can see your point but due to corporate governance or government regulation there might be a policy that all refinances have a new appraisal. Besides the loan companies pass on the cost to you, so other than customer service they have no incentive to circumvent their policy.

So your main goal would be to find a lender that is very customer focused. I'd start with my current lender. Let them know they are in danger of losing this loan. I find that you have better luck with regional banks.

My last refi was a situation where the loan officer had to go to work for me. She did an excellent job too. I clearly stated what I need, she understood, and went to work for me.

There are some that are customer focused out there, your job is to find them. Good luck.

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    +1 for "government regulation." In recent years, the home buying/mortgage process has seen lots of new regulations, at least in the U.S. Even if a lender did want to work with you to "reuse" some of the paperwork, in most cases it would not be legal for them to do so. – Ben Miller Jul 13 '16 at 15:53
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Call yourself the lender. You have just processed a large amount of paperwork, fielded calls, filed forms, etc. to set up a loan. In addition, a part of those closing costs was likely a loan origination fee, which is actually a fee to purchase the loan. Without that loan origination fee, your 3.625% would likely have been more in then 4.5% range, but instead that effectively pre-pays a part of the interest.

So, two days later, underwriting rates drop, and your customer comes back and says they should get the 3.4%. Wait just a second, you already got underwriting, at a higher rate. Would you be willing to re-write the loan? Sure, but not for free. You might agree to re-use the appraisal, credit reports, etc. and waive those fees, but the customer is surely going to have to repay you for all the filings, and all applicable origination and your time and effort. The costs may be less than starting from scratch, but the will be well more than the savings from a fractional drop in interest rates. This is why traditionally, the 1% drop in interest has been considered the refinance point.

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The answer to your question is, generally speaking, yes. If you have a very recent appraisal and other documents, you can usually reuse them and get a super cheap or free refinance.

My brother bought a home not too long ago and then refinanced twice within 6 months. In both cases he didn't have to pay anything at all for the refinancing because he already had his previous documents and they weren't old enough that the new lenders wanted them re-done. I think he gained a half a percent one time and a quarter of a percent the other refinance. Ordinarily not worth it, but if it's free, it's unambiguously good.

Of course, it may be the case that some lenders will and some will not accept paperwork that has already been used. You may need to shop around, but you will surely find lenders who will do it. My brother found two in very short order and little effort.

As someone pointed out, your existing lender may just lower your rate if they legitimately think you are going to refinance. Might try that first.

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