Author Topic: Making money on refinancing a house  (Read 877 times)

themagicman

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Making money on refinancing a house
« on: February 27, 2020, 08:31:01 PM »
I currently have a paid off house. Looking at a cash out refinance, one option is a 4.5% interest rate and they will pay me $2k. What is stopping me from doing that and paying immediately off? Could I keep doing this with different banks?

YttriumNitrate

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Re: Making money on refinancing a house
« Reply #1 on: February 27, 2020, 10:24:41 PM »
Are you sure there aren't closing costs rolled into the loan amount that exceed the $2000 cash back?

themagicman

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Re: Making money on refinancing a house
« Reply #2 on: February 27, 2020, 11:55:47 PM »
Are you sure there aren't closing costs rolled into the loan amount that exceed the $2000 cash back?

Yes, it does not look like it

themagicman

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Re: Making money on refinancing a house
« Reply #3 on: February 28, 2020, 08:12:28 AM »
I just read through the documents. It looks like I am a negative $5,500 to take that rate and a total closing cost of $3,600. So it is giving me $2k

YttriumNitrate

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Re: Making money on refinancing a house
« Reply #4 on: February 28, 2020, 08:30:53 AM »
How about prepayment penalties?

ChpBstrd

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Re: Making money on refinancing a house
« Reply #5 on: February 28, 2020, 08:33:57 AM »
How about prepayment penalties?

My thought exactly. This would be too easy to exploit otherwise. One could exploit it for a living.

themagicman

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Re: Making money on refinancing a house
« Reply #6 on: February 28, 2020, 09:00:35 AM »
How about prepayment penalties?

My thought exactly. This would be too easy to exploit otherwise. One could exploit it for a living.

I did not specifically ask that but most mortgages I have done in the past did not have prepayment penalty. Yes, I was thinking it was easy to exploit. I figured I could not have been to first person to think of this.

Assuming they say, there are not any prepayment penalties with any of their mortgages. What else??

themagicman

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Re: Making money on refinancing a house
« Reply #7 on: February 28, 2020, 09:01:59 AM »
"Mortgages also contain a prepayment option that allows you to pay off your
mortgage prior to the end of the term with no penalty. You can refinance your
mortgage or sell off the property. Of course, if you prepay early into the mortgage’s
life, then buying down the rate may not be as beneficial."

From their website. It is through Ally

ChpBstrd

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Re: Making money on refinancing a house
« Reply #8 on: February 28, 2020, 09:14:54 AM »
How about prepayment penalties?

My thought exactly. This would be too easy to exploit otherwise. One could exploit it for a living.

I did not specifically ask that but most mortgages I have done in the past did not have prepayment penalty. Yes, I was thinking it was easy to exploit. I figured I could not have been to first person to think of this.

Assuming they say, there are not any prepayment penalties with any of their mortgages. What else??

Look very closely at the final paperwork you are signing.

If no prepayment penalty, then execute the exploit!

But also validate your math on whether you walk away with cash or simply a discount on closing costs.

v8rx7guy

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Re: Making money on refinancing a house
« Reply #9 on: February 28, 2020, 09:36:57 AM »
In my opinion the juice is not worth the squeeze here...  I would not do it.  Too many things to potentially go wrong for $2,000.

slappy

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Re: Making money on refinancing a house
« Reply #10 on: February 28, 2020, 03:04:43 PM »
I just read through the documents. It looks like I am a negative $5,500 to take that rate and a total closing cost of $3,600. So it is giving me $2k

What does it mean to be negative $5500?

YttriumNitrate

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Re: Making money on refinancing a house
« Reply #11 on: February 28, 2020, 03:09:19 PM »
I just read through the documents. It looks like I am a negative $5,500 to take that rate and a total closing cost of $3,600. So it is giving me $2k
What does it mean to be negative $5500?
He's getting negative points by accepting an interest rate that is ~1% higher than what he should be paying. Similarly, he could pay points and get a lower interest rate.

Gronnie

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Re: Making money on refinancing a house
« Reply #12 on: February 28, 2020, 03:10:20 PM »
Are you sure there isn't something like "not to exceed actual closing costs" in there somewhere?