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About 11 months ago I refinanced at 2.875% with loan amount $267k. A month ago I was offered 2.5% with about $3k broker credit (on $256k) towards closing costs, so I decided to refinance again. I figured since I'm not paying anything out of pocket I have nothing to lose, since this credit covers all the costs plus about $500 towards escrows.... and about $5k savings on interest over the life of the loan (15yr).
Today I got my HUD-1 and closed a couple of hours ago.
In April I told my broker the current principal balance was about $256k.
I didn't check my current loan since, assuming my broker will get the payoff balance from the bank. Just now I checked and my broker requested payoff balance from the bank on May 17th and that was $254,989. Now, for some reason on my hud-1 payoff is $255,891 with the new loan principal amount of $256k. Was that just an honest mistake?
I assume the bank will owe me $902 ($255,891 - $254,989) once they get the payoff. correct? If so, I guess can I ask the bank to put this money towards principal right away to avoid paying interest on it or I guess I can just ask them to send me a check.
Please note - this was a no cost refinance with broker credit. The closing costs were not (supposed to be) rolled into the new loan
Thanks
Last edited by Nikon5400; 05-28-2013 at 10:41 PM..
Mortgage Interest is charged daily, and in arrears. Had you closed earlier in the month, the lower payoff number would have been more accurate. However, it is 2 weeks later = more interest to pay.
You can request both payoff forms - - it sounds like they had to get an updated payoff, so there should be two in the file.
but still, the interest on May 1st payment was $613.82, while the difference between payoff amounts is $902. Does it mean my old bank still owes me about $300 (assuming I pay on the 1st of every month and the old loan will get paid off on the 1st as well) ?
Thanks
Last edited by Nikon5400; 05-28-2013 at 11:03 PM..
Since this is a refinance, odds are the payoff amount includes some additional days just in case the funds are not in the mortage holders hands on the date specified. The normal amout is about 6 days worth of interest which is refunded to you if it's above the actual amount owed. Do not assume that the day your refinancing occurs is the same day your old lender gets the payoff dollars in their hands.
Yeah, but still, $902 seems a little too much, considering the interest for the whole month of April was $613 (paid with May 1st
payment)
According to HUD-1 line 902 my daily interest is $17.78, which adds even more confusion since it doesn't add up to anything (17.78 * 31 = $551.18)
Also, with old loan getting paid off on June 3rd and the 1st payment on the new loan being August 1st, when is the interest for June getting collected (I'm talking about the whole month of June, not June 3 - June 1)?
Thanks
Last edited by Nikon5400; 05-29-2013 at 06:07 AM..
Yeah, but still, $902 seems a little too much, considering the interest for the whole month of April was $613 (paid with May 1st
payment)
According to HUD-1 line 902 my daily interest is $17.78, which adds even more confusion since it doesn't add up to anything (17.78 * 31 = $551.18)
Also, with old loan getting paid off on June 3rd and the 1st payment on the new loan being August 1st, when is the interest for June getting collected (I'm talking about the whole month of June, not June 3 - June 1)?
Thanks
Was any of the $902 go to escrow?
When you refinance, 1st payment is usually 1+ month later. Some people like this cause they don't need to put out money but the truth is that you are paying for it. Interests for June and July is rolled into your loan amount.
Interests for June and July is rolled into your loan amount
So, this ends up being an interest on the interest?
I guess if the interest rate wasn't this low, it'd make a lot of sense to make June\July payment?
Interests for June and July is rolled into your loan amount
So, this ends up being an interest on the interest?
I guess if the interest rate wasn't this low, it'd make a lot of sense to make June\July payment?
Let me clarify.
If you closed on the 3rd of June, at closing, you prepaid the interests for the month of June with either closing cost or it is taken from your loan amount.
When you make your August 1 payment, you are paying July interests along with principal payment.
This is one area where people usually forget when it comes to no "out of pocket" refinance. You are paying interests on any expense associated to the loan if you are not paying out of pocket.
Are you sure that this isn't where the differences you are claiming isn't going to? Prepaid interests for the new loan.
I agree with the above that it sounds like you're paying May's interest within your payoff amount in addition to the rest of June's interest at closing. Your first mortgage payment will pay July's interest.
Also, if you are refinancing with a different lender than the lender you currently have, you have a 3 day right of rescission so they need to collect for those days as well. If you are refinancing with the same lender, it should fund same day.
This is one area where people usually forget when it comes to no "out of pocket" refinance. You are paying interests on any expense associated to the loan if you are not paying out of pocket.
Are you sure that this isn't where the differences you are claiming isn't going to? Prepaid interests for the new loan.
I think I understand it now better. I completely forgot about the interest paid in arrears. The payoff I see online is principal only, while there's an interest + some fees from an old loan, which all add up..
I'm getting broker credit to pay for closing costs, plus some on top.. so my "no out of pocket" is not rolled into new loan. My theory is - the more broker\lender credit, the better, as long as rates keep dropping or if there's no intention to stay in the house for the entire loan term. This way I can refinance over and over, which is what I've been doing when the rate drop was 3/8 %. I don't pay for refinance out of pocket, so I have nothing to lose, while saving on the interest over the life of the loan is not that big ($4-5k), it's still a saving. Please let me know if I'm missing something..
Thanks a lot for your replies.
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