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
So impressive you saved that much money!
saving this for the future, for sure!
Great! Would love to know what was the bet information for you.
It blows my mind to see so many people around with their old rates. Good to get this info out about refi for a lower rate
I agree! The first rate is not always the best. Its always good to look around every 6 months just to check in on housing rates. It could save you hundreds!