Many people fall victim to not knowing you can refinance your home mortgage after buying a home. When choosing a lending company, it is ideal to find a company that is reputable, reliable, and truly has your best interest at heart. I am so thankful for Freedom Mortgage’s Federal Housing Administration (FHA) Program.
If you read about how I purchased my first home, you know one of the main perks of an FHA loan is the low rate of a 3.5% down payment for a home purchase. Most first time home buyers may not have ample liquid cash to provide up front, so this is a great program to provide equitable access for first time property owners to get their foot in the market.
The Refinancing Process
A Freedom Mortgage customer service representative first reached out to me about refinancing my home mortgage about 7 months after my initial closing. Mortgage rates were dropping considerably around October 2019, and I was eligible to reduce mine. I know what you might be thinking, what’s the catch? I was being offered a lower interest rate, lower monthly payment, and no cash to close on the new loan! How could this be possible? (PS. If you’re looking to shop rates, I always use this reliable source!)
Freedom Mortgage was able to do this for eligible FHA Buyers by wrapping the final closing costs into the new loan. When closing on a new loan, there will always be cash needed to close for lawyers and paperwork fees. They would then provide a new loan at a lower interest rate, which across 30 years would save me thousands of dollars. I immediately searched amortization tables (you can find one here!) to see how much money my current loan was costing across 30 years compared to if I refinanced under Freedom Mortgage’s recommendation. The results were shocking! With every 6 months of payments paid on time, Freedom Mortgage was able to *continuously* provide this service to its eligible customers.
After extensive research, I decided that refinancing would be the best choice to make for my financial plan. Since making this change, I have now been able to refinance for a lower rate 3 TIMES! Note: You can refinance as many times as you want. The main considerations are balancing the total amount of money owned across 30 years versus what you can afford for a monthly mortgage note. You won’t believe the numbers below.
FHA Versus Conventional
Now, keep in mind that I will eventually want to switch to a conventional loan since the private mortgage insurance (PMI) remains on an FHA loan for the entirety of the loan versus PMI dropping off after 20% equity in the home. I will be looking into switching this February/ March depending on rates since we still have $215 of our mortgage going to PMI each month. That means we may have started at $2200/month for this home, but it will eventually be down to below $1500/month!
Amortization Table To Compare My Loans Across 30 years
|Annual Interest Rate||4.50%||3.50%||2.75%||2.25%|
|Term of Loan in Years||30||29.25||28.66666667||30|
|First Payment Date||5/1/2019||1/1/2020||10/1/2020||8/1/2021|
|Payment Type||End of Period||End of Period||End of Period||End of Period|
|Rate (per period)||0.375%||0.292%||0.229%||0.188%|
Total Savings: 284,009.54