The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: themagicman on February 27, 2020, 08:31:01 PM
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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?
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Are you sure there aren't closing costs rolled into the loan amount that exceed the $2000 cash back?
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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
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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
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How about prepayment penalties?
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How about prepayment penalties?
My thought exactly. This would be too easy to exploit otherwise. One could exploit it for a living.
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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??
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"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
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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.
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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.
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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?
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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.
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Are you sure there isn't something like "not to exceed actual closing costs" in there somewhere?