TIME TO REFINANCE EVERYTHING - ESPECIALLY MORTGAGES

Interest rates on all consumer loans have been dropping. This is great news if you have debt, such as student loans, auto loans, mortgages and etc.

If you have student loans with a rate higher than 2%, you should refinance.
If you have a 30-year fixed mortgage with a rate that’s over 3.75%, you should refinance.
If you have an investment property with an interest rate of over 4.25%, you should refinance.

Given a mortgage payment is typically the largest expense for most people, it’s especially a great time to refinance your mortgage to a lower rate because the rate is at a historic low again. It is unlikely to go much lower, MAYBE by another 1/4 at most.

Federal Reserve: https://fred.stlouisfed.org/series/MORTGAGE30US

THERE ARE 2 TYPES OF LENDERS, AND ONE IS BETTER THAN ANOTHER

I have gone through 2 home purchases , 3 refinances, and 5 appraisals in the last 4 years. In my personal opinion, the best way to save time and money during a refinance is to find a lender that sells your loan, not holds it.

Let me explain.

In order to save money, you first need to understand how lenders make money during a refinance so you can align their incentives with yours. There are basically two types of lenders, the ones that hold your loan and the ones that sell your loan. You’d want to go through with a lender that sells your loan.

BIG BANKS HOLD YOUR LOAN, AND THEY ARE EXPENSIVE AND SLOW

Big banks and credit unions can help you refinance, but they tend to hold your loan with them after you refinance, so you will continue to pay your monthly payment to them.

These lenders may have a reasonable (and occasionally) low interest rate, but they typically charge extra fees. These lenders make money through interest charges, as well as fees associated with closing costs. The main one is called an origination fee. In the simplest term, loan origination fees are pure profit for lenders, and they are not used for anything in particular. By that I mean, typically a recording fee is used to record your loan, an appraisal fee is used for an appraisal, but the origination fee is not used for anything specific. The crazy thing is that it could be quite high, as most charge $500 - $1,000 or 1%.

These lenders tend to be slow as well, not only because they are big bureaucratic organizations, but also because there’s no financial incentive for them to move fast. In other words, getting your loan closed in 3 weeks does not make the company, or the person who works on it, more money.

REFINANCE FROM LENDERS THAT SELL YOUR LOAN

There’s a different type of lender. They are not banks or credit unions. This other type of lenders originates loans and then sell to big banks and credit unions as soon as possible.

They are cheaper because they typically don’t charge any origination or processing fees. You may wonder how do they make money if they don’t charge anything? Well… unlike the banks who hold on to the loans, these lenders sell them. When they sell the loans to banks and credit unions, they make a profit.

Having your loan sold is actually great news for the borrowers who want zero costs because the incentives are aligned. The borrowers don’t want to pay anything extra during a refinance. These lenders don’t care because that’s not how they make money. As a result, having an origination fee of $0 or $1,000 is the same to them. For that reason, they might as well do $0, in order to attract more customers.

These lenders also process the refinance very fast, because they make money only when they sell the loan. Think about this, their incentive is on speed and volume. They want to originate the loan as fast as possible and hold it for as short as possible, so they can make their money. For this reason, they want to process the loan just as fast as you and I do.

Doing a refinance with these lenders does have its drawbacks, which is that your loan may be sold once or twice in the near future, as you will not be paying your monthly payment to your original lender. It takes a bit of discipline and a bit of patience to keep track of all this. But it is totally worth the saving.

I RECOMMEND LENDERFI (NOT SPONSORED)

I’ve used LenderFi twice personally and I like it for these reasons listed below. LenderFi is definitely not unique, as there are quite a lot of these lenders in the buy-then-sell space all over the country. I recommend this one because I’ve had repeated personal experience with it, so I know more about how they operate.

No Origination Fee: There are 0 costs to the loan.
2-3 Weeks Closing: I’ve refinanced twice with them. One took 2 weeks, another one took 2.5 weeks.
Competitive Rates: I compare LenderFi’s rates to Wells Fargos all the time, because they both publish their daily rates online. LenderFi wins every time.
Transparent Rates Online: You can literally review all your options online. No need to call.
Great Communication: I’ve worked with their support team, especially Rebecca Jackson. Not sure if she will ever read this. But she’s been awesome in both of my refinances.
Potentially no appraisal: In one of my refinances, I didn’t need to order an appraisal, which most likely also cut my processing time shorter.

Ep.82- How to Refinance Your Mortgage in 2 Weeks with No Fees

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