Because I have several properties (primary, rental, vacation/rental, vacation), people ask me all the time how often they should refinance their mortgage.  My answer is always, “As many times as it takes to save you money!”

I’ve refinanced my primary mortgage four times in seven years and I won’t stop as long as rates keep going lower.  The Federal Reserve has conducted so much monetary easing over the past 10 years that everybody with a mortgage should have refinanced at least a couple times!

In the fall of 2012, I refinanced my jumbo 5/1 ARM at 3.625% down to 3.125% with no fees or cash outlay.  It took about 70 days, but it was well worth it because I only had two years left before my fixed rate expired.  My interest payments went down by a several hundred bucks.

I thought I was set for another five years until I checked again at the end of January, 2012 when the 10-year yield dropped to 1.85% from 2%.  To my surprise, I discovered I could refinance AGAIN just 5 months later. This time, at a rate of only 2.625% for 5 years!  Banks began lending again, sacrificing margins for market share.

Although my mortgage refinance took around 100 days to complete, I’m now so thankful that it’s done because I no longer have a W2 paycheck, making it brutally difficult to ever refinance or get a mortgage again!  By taking action, I’m able to save around $20,000 in interest expense over the next five years.

It’s now 2016 and I’m in the process of refinancing my mortgage again and getting a new one because I’m buying a new property in Golden Gate Heights in San Francisco. Despite the 10-year yield rising to around 2.3%, mortgage rates have stayed flat to come down because margins have also come down. This is GREAT for consumers.

THE BIGGEST DETERRANTS TO REFINANCING A MORTGAGE: KNOWLEDGE, FEAR AND LAZINESS

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“Work a lifetime to pay off a house. You finally own it, and there’s nobody to live in it.” – Death Of A Salesman

After twelve years of methodically refinancing my property whenever rates dipped, and consistently paying down principal every month, I finally own my two bedroom condo in Pacific Heights, San Francisco free and clear!

The condo originally cost $580,000, which I thought was relatively good value for a 2/2 with parking and a park view in 2003. I had relocated from Manhattan two years earlier where all park view condos cost a bloody fortune. Go watch Millionaire Dollar Listing New York to see for yourself. My condo is nothing fancy, but it has everything one needs to live a comfortable life in my favorite city in America.

According to Zillow, USAA, and a one bedroom sale in the same building last month, the value of the condo could be worth double its purchase price with a little bit of updating. Whatever the real value is, I don’t plan on ever selling because it is an income generating engine. Real estate is “forced savings” at its finest.

Summary: It still takes brutally long to get qualified for a new mortgage or refinance a mortgage via the bricks and mortars banks in 2018. You need all your paperwork together and a healthy W2 income or two years of 1099 income. The best thing anybody can do is get free quotes online from a mortgage marketplace like LendingTree, and bring these solid quotes into your existing bank and have them compete for your business. That’s what I’ve done, and it’s worked. Here is a story about one of my previous mortgage refinances.

At long last, my latest principal residence mortgage refinance is now closed! Things were looking very dicey towards the end after PG&E threw a couple grenades my way that hit my credit score by ~100 points due to a $8 non-payment from three years ago by my tenants. Alas, the Humvee was able to withstand the blast from corporate evil and make it back to home base!

The mortgage loan refinance started on January 20, 2015 when I overheard a colleague say he just locked a 5/1 ARM for only 2.75%. Ehh? I had just refinanced my own 5/1 ARM in the fall of 2014 to 3.125% from 3.625% and I wanted to dance the mambo too! I incredulously gave Citibank a call to see if I could get the same offer as my colleague with all fees baked into the price and they said absolutely!  In fact, the very next day, my banker called me to say that they could give me 2.625% with all fees included. Yeah baby, yeah!

THE MORTGAGE LOAN REFINANCE SAGA

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It’s official. I’ve failed in my attempt to refinance a $1 million 5/1 ARM mortgage from 2.625% down to 2.25%. Am I disappointed? Yes. But am I surprised? Not really. Bank lending continues to be extremely tight post the financial crisis. I wish all freelancers, contractors, and folks looking to minimize their debt only the best of luck!

Financial failure is great because it allows us to learn from our mistakes, make better decisions, and get wealthier over the long term. I’ve got a whole list of financial mistakes I’ve made in the past if you care to take a look.

I’m of the belief we should always take action to improve our finances. Letting the housing market increase or decrease in value doesn’t take any effort once a property is purchased. But imagine experiencing an effortless increase in property values while putting some legwork into reducing mortgage costs. That’s a winning combination.

This post offers up some plain truths as to why I failed, and what I plan to do about it. Maybe you’re having a tough time refinancing yourself? This post may offer some comfort, hope and direction.

I must be mad, because after multiple mortgage refinances, I’ve decided to take my own advice on improving my cash flow further by trying to refinance my mortgage again! I say “trying” because getting a mortgage or refinancing a mortgage is still not a slam dunk like it was pre-2007.

Lending standards are strict with ~729 being the average credit score for denied mortgage applicants. Furthermore, my debt-to-income ratio could be a problem because 100% of my 1099 (freelance income) won’t count for 2014 because banks require two years of 1099 income, and I’ve only got 14 months worth.

Can you believe that? Even if I made $800,000 in freelance income over the past twelve months, big banks would still disavow all of it and likely reject even a small mortgage refinance amount if I had no other income. Banks should discount 1099 income by some amount, but not by 100%. There’s a growing misconception now that full-time income is more stable. A full-time employee is betting on one horse. An independent contractor can bet on multiple horses.

We’re close to all-time lows again in 2H2015. Volatility is up, collapsing oil prices are stoking fears of weak global consumer demand, and chaos reigns once again in Europe. I’m glad there isn’t anymore US government shutdown drama at the very least.

I’ve got two years left on a ~$1 million dollar jumbo 5/1 ARM at $4,338 a month at 2.625%. My goal is to refinance this puppy down to a 2.25% 5/1 ARM at $3,822 a month, for a cost of less than $3,000. The annual interest savings is $3,750, and the monthly cash flow increase is $516 or $6,192 a year. That’s a good move towards my unwavering quest to generate $200,000 a year in passive income. 

My last mortgage refinance took 97 days to complete after averaging only 45 days for my previous three refinances between 2005-2010. So what on earth caused mortgage refinance times to skyrocket by 100% in my latest refinance in 2016?

After writing dozens of posts, reading hundreds of comments, and speaking to multiple loan officers offline and online for the past 18 months, I’ve come with six definitive reasons as to why refinancing a mortgage now is as fast as a stampede of turtles running through peanut butter.

If you plan to go through a mortgage refinance, mentally plan for a three to four month long process. If the refinance gets done sooner, then great. If not, your expectations have already been set.

MAIN REASONS WHY MORTGAGE REFINANCING TAKES SO LONG

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In the Spring of 2012 I almost had a heart attack and then a meltdown when my bank told me on day 80 of my mortgage refinance saga they weren’t going to proceed. Trading information back and forth for 80 days was already painful enough. To get told almost three months into the process that I would not get the 2.625% 5/1 ARM due to a missed $8 electricity bill from two years ago was devastating!

Capillaries in my brain began exploding as I wondered why my tenants didn’t pay their final electricity bill, why the utility company didn’t send me the bill, and how an $8 bill could crush my credit score from 790 to 680. The plan was to refinance my primary home mortgage before quitting my job while I still had a W2 paycheck, otherwise, there would be no way I could pass the gauntlet.

As a result of this discovery, I had to basically threaten to pull almost seven figures of assets from the bank if they dared to stop the refinance process so late in the game. A senior manager got on the phone with me and said not to worry. He had a connection with a manager at the utility company where my $8 late payment was due. They apparently ate lunch together once a week,

Not one to do nothing, I took to social media and contacted Pacific Gas & Electric through Twitter to highlight my grievances. They responded instantaneously to my request and issued a “Clear Credit Letter” to my bank to remove the penalty. After another 10 days of waiting, my bank finally gave me the confirmation they could proceed. Talk about torture!

Refinancing a mortgage with a traditional bank is even tougher than I initially thought. Before you proceed, take a guess at what the average credit score is for rejected mortgage loans. 650? 675? 700? I think you’ll be amazed at how tight mortgage standards are still in 2015, five years since the financial crisis ended.

THE AVERAGE FICO CREDIT SCORE FOR DENIED MORTGAGE APPLICANTS

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As I was getting harassed at the car dealership the other day, it dawned on me there are optimal times throughout the month and year to refinance a mortgage due to human nature. Dropping by the car dealership every other week is one of my favorite hobbies because I get to go for test drives, soak up that wonderful new car smell, and curiously practice my negotiation skills all for free! Try it some time.

I’ve refinanced my primary mortgage five times, and have refinanced my other rental properties by a combined 10 times in the past 10 years. With each refinance, I get better at negotiating. I learn where I can press for credits and when I can no longer squeeze blood from stone. One mortgage officer called and yelled at me when I asked for another $250 credit at closing given he promised a no out of pocket refi. I got him to own up to our agreement, but we never did business again.

I’ve gotten to know five mortgage loan officers across various traditional banks such as Citibank, Bank Of America, and Chase. One loan origination officer also works at LendingTree, my favorite online mortgage network to check real rates with no obligation. They’ve all shared with me some of their motivational points, which are all the same. With my experience in refinancing, working in finance, car dealing, and personal relationships with people in the mortgage business, let me share with you some discoveries I’ve found to get the best rates possible.

THE BEST TIME TO REFINANCE A MORTGAGE

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