Mortgage Refinance Strategies And Points You Should Understand

Mortgage refinance strategies

Congrats on being a homeowner! Real estate is one of my favorite asset classes. Over the past 20 years I've owned seven properties and have done multiple mortgage refinances. There are several mortgage refinance strategies and points I've learned along the way that have enabled me to save significantly.

I hope my mortgage refinance strategies and tips below can also help you save a lot of money with your refinance process as well.

The Mortgage Refinance Process

I remember back in 2011 how happy I was when my primary residence mortgage refinance was completed. It took 8 weeks from start to finish.

The process took so long that I actually forgot I was refinancing my mortgage until the bank called to ask when I could meet the notary to sign all the documents.

The process was pretty painless since I refinanced with the same bank. I sent them the general paper work such as my W2, bank asset statements,  and pay stubs.

They did one appraisal which took all of 20 minutes. Then all I had to do was wait four more weeks to get it done! That refinance was much easier than the refinance I did the year prior.

Funny enough an 8-week mortgage refinance sounds fast to me now. I did a refinance in 2019 that took over four months to complete. That was brutal, but ultimately still worth it in the end.

Mortgage Refinance Strategies To Consider

I've learned a lot of things from all my various refinances over the years beyond the basics. I hope you'll find my below mortgage refinance strategies useful in your mortgage refinancing or initial mortgage application process.

1) Try and refinance with the same bank. 

If you go through the same bank as your mortgage, you might get some extra discounts. Given you are an existing customer, your lender wants to keep your business. 

During one of my refinances, my bank gave me an extra 3/8 credit. Plus they waived the $750 home appraisal fee so that there were no out of pocket expenses. 

Furthermore, they had all the basic paperwork already and just needed some updated forms. Using my existing bank made things much easier.

2) You have one free pass.

Even after you “lock” in your mortgage, once your application gets approved you are able to ask for a lower rate if rates decline in the application approval process. 

When I locked my 3.25% 5/1 ARM rate, the 10-year yield was at 2.1%. Not bad I thought. But over the next two weeks, the 10-year yield plummeted to as low as 1.75%, or a full 35 bps lower. 

Rates were very volatile and settled somewhere around 1.88% when I asked if they could lower my rate further. They said yes, and lowered my rate to 3.125%.

3) ARM loans are assumable. 

Let's say I want to sell my primary home in two years and 5/1 ARM rates rise to 8.125% due to inflation and a recovery in the economy. If the buyer qualifies, s/he can assume my 5/1 ARM at 3.125%, thereby saving 5% in interest expense! 

A lower mortgage rate is a huge benefit to the buyer because it allows the buyer to pay more or get more home. In effect, you have shorted a bond in the amount of your mortgage and will capitalize on the gain.

4) Title insurance is extremely important. 

In fact, title insurance is like the bible for your property. A title insurance policy is a contract of indemnification for loss by encumbrance, effects in the title, or invalidity, or adverse claim to the title to the real property that may occur prior to the effective date of the policy.

In other words, the title company guarantees the veracity of the property you are purchasing or selling. If there are any discrepancies or disputes, the title insurance company will fight for you.

Make sure you keep a copy! You never know who will try and make an adverse claim on your property 30 years from now.

5) Refinance before you leave your job.

Another one of my mortgage refinance strategies is to always refinance before you leave your job. You may think, “Oh I'll wait and do it after I quit because I'll have so much more time on my hands.” Not a wise move.

Banks need to see recent W2s, independent contractor income only counts if you have two years worth, new jobs carry less weight. Plus, you'll lower your own risk of default. Income and expenses are uncertain when you don't have a dependable salary after all.

6) Understand all the mortgage refinance fees.

Very few things in life are truly free. There are fees all over the place including refinances. Make sure you understand all the mortgage refinance fees your lender is charging. There are a lot of them!

Related: What Is A No-Cost Refinance Mortgage And How Does It Work?

7) Avoid Large Financial Changes Before/During A Refinance

Another one of my mortgage refinance strategies is to avoid any significant financial change before or during a refinance.

For example, avoid all of the below if at all possible:

  • Buy a car, boat or anything very expensive
  • Purchase another property
  • Make big deposits or withdrawals in your bank accounts
  • Credit inquiries
  • Quit your job, get laid off, start a new job, or retire
  • Lower your income if you're self-employed
  • Make changes to your revocable trust

Lenders have stringent underwriting processes these days. They will go through your accounts with a fine tooth comb. Don't give them any unnecessary reasons to question your viability.

You could still qualify for a refinance if you do any of the items above, but you'll have to undergo a longer, more stressful refinance process. Feel free to peruse my mortgages category for more helpful tips.

8) Shop around for a mortgage

Check the latest mortgage rates online. You'll get real quotes from pre-vetted, qualified lenders in under three minutes. The more free mortgage rate quotes you can get, the better. This way, you feel confident knowing you're getting the lowest rate for your situation. Further, you can make lenders compete for your business. 

Investing Recommendation

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Real estate is a key component of a diversified portfolio. REC, or real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible.

For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you're looking for strictly investing income returns.

Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It's free to look.

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In addition, please sign up for the Financial Samurai Newsletter here to receive exclusive content. Further, you can subscribe to the Financial Samurai podcast for even more insights and tips.

Related: Why I Won't Pay Off My Mortgage Until I Retire

About The Author

22 thoughts on “Mortgage Refinance Strategies And Points You Should Understand”

  1. Oscar Morrison

    It’s really good to know that ARM rates can be transferred, I hadn’t realized that. We’re probably going to be downsizing in a few years, but our bank could really improve our rate if we refinanced right now. We didn’t want to go through the hassle if we were just going to sell the place soon anyway, but if we can lock in a lower rate for a potential buyer then it might make selling it easier. Thanks for the tip!

  2. Cherleen @ yesiamcheap

    This is my dilemma. I am actually contemplating whether to refinance our home or not. I guess I need to start looking for a better deal.

  3. We’ve been mortgage free since 1993 so no refi possible or needed….unless I take the plunge and buy a rental property and take out a loan on it. It’s great to see eveyone keeping up with the latest on the regs on this though.

    1. Definitely no need to change what you’ve got! I’m considering a cashout refi given the rates are so low, and I’m eyeing some potential new deals. Is TBD though until end of November.

  4. Very timely post Sam since my hubby and I were just talking about this yesterday. There are some low rates right now in Canada so we have been discussing renewing early and one of the options we talked about was renewing with the same place. I am not sure if we are going to do it yet but if we do, these tips will be very handy.

  5. Real estate is a no brainer now IMO. It just takes conservative forecasting and knowledge to make it work.

    It is ridiculous how much cash-flow one generates 3, 5, 10 years later.

    Good luck! Just make sure you really want to live where you buy for 5 years.

  6. This is my dillemma: if we want to sell our primary home in two years, is it really worth to pay refi costs of about $5000? I’ve been contemplating it for months.

    1. Look for a mortgage broker that will give you a no point no closing mortgage and thus any decrease in interest rate is worth it since you paid no upfront costs.

      Yes the interest rate will be higher than a loan with points and closing costs but you will not have paid anything to get the loan.

      I have obtained 3 no point no closing cost loans in the last 4 years with the last being in October. If the rates go down or if I want to extend the life of the loan or borrow more money – I can do this again next year, since I did not and will not pay any out of pocket costs.

      Hope this help,

      Davied M

    2. My preliminary answer is no way in hell, unless your mortgage is over a million bucks.

      If you can save $5,000 in interest expense ie $410/month, you break even in 13 months, and that might be worth the hassle.

      Just do the math. It’s pretty straightforward.

      1. Interesting… so if we have other expenses that require 5K, then it is not worth it. Am I correct? For some reason this refinancing stuff is confusing to me. :)

        1. Look at Sam response above and run the numbers. If you put in your balance and your current interest rate and the new refinanced rate you will calculate your monthly savings. Then do as Sam did divide the total cost by the montly amount saved to determine how many months it would take to recoup your fees.

          As I stated above, if you get a no point no closing cost mortgage – your fees will be zero but your interest rate will be higher than a mortgage with points and closing costs. However, if the new rate on the no points and no closing cost mortgage is below the rate your currently have then it is a “no brainer” that you should refinance.

    1. as long as you are current on your mortgage and it is a fannie mae conforming loan you should be able to refinance under the new guidelines

  7. Sunil from The Extra Money Blog

    agreed that one should refi with the existing lender if possible. i am in the process of refinancing at 4.25 30 year. also read today about potential moves to make refinancing easier on upside downs and no / low equity homes. interested in what the rates would be for investments / rentals.

  8. I looked into the 5/1 ARM at 3.1% and it did not make sense considering my balance. For me, the better choice would be to add principal payments. I save the closing costs and fees.

  9. Money Beagle

    We just finished our re-fi on Friday, which was five weeks to the day that I called and locked in my rate. That was quick, for sure. We had a 5.875% 30-year loan from 2007 that we re-financed to a 3.375% 15-year loan. That would make the total term around twenty years.

    The re-fi will save us roughly $80k in interest over the remaining time.

    After we locked, the rates went down a tad (to 3.25%) for a couple of days. I called about getting that rate but they said they would only adjust at closing, which by last Friday had gone back up to around 3.625%.

  10. I got a 5.25% 15 year mortgage in April 2008. I refinanced into a 4.00% 10 year loan in September 2009. I refinanced into a 3.50% 10 year loan in October 2011.

    I paid no points and no closing costs in any of the 3 mortagages.

    I did not know about asking for a lower rate – I locked in early September at what I thought was a great rate. However, as you stated, rates went down from there. I did not know to ask for a lower rate – thanks for informing me of this.

    If rates go down again – I will refinance again – that is the beauty of a no point no closing loan!

    Maybe I will take out some additional money and/or extend the length of my loan the next time I refinance?


    1. I’m shocked that in 2 weeks, we’ve gone from a low of 1.78% back up to 2.4%. For anybody wanting to refinance now (10/27/11), I’d wait for rates to get back down.

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