Refinancing your mortgage in 2020 and 2021 became incredibly popular due to historically low mortgage rates. However, a common issue people faced was the long processing time by lenders, which could end up being quite costly. Let me share my experience to illustrate what can go wrong.
I was close to finalizing my mortgage refinance with Citibank, just a week away from closing, when I decided to pull out of the deal. The reason was that Citibank didn’t honor a promised rate reduction from 3% to 2.875%. Frustrated with their broken promises, I started looking for better offers.
I then found a more appealing offer from Wells Fargo. They gave me a 2.875% rate on a 7/1 ARM and added a $2,000 credit, on top of transferring $750,000 in assets. This deal was not only about a lower rate but also significant savings. Citibank had initially promised to match any better rate I found, so I approached them again hoping they’d match Wells Fargo’s offer. They didn’t, leading me to finally cancel my application with them. Citibank refunded my upfront costs for the appraisal and credit check, which was a small consolation.
Transitioning to Wells Fargo seemed promising, but that too came with its challenges. The process dragged on much longer than expected, causing me to resubmit financial documents as the originals expired. My loan officer at Wells Fargo had assured me everything would be completed in time to avoid a rate increase from my current mortgage, which was set to jump from 2.5% to 4.5%. Unfortunately, due to a backlog in processing refinance applications at Wells Fargo, this didn’t happen as planned.
This delay is costing me significantly in extra mortgage interest each day beyond the expected closing date. Initially, I hadn’t factored in the possibility of such extensive delays. This oversight means I’m now paying the higher interest rate of 4.5% while waiting for the refinance to close, which translates into more than a thousand dollars in additional costs if the delay extends for a month.
From this experience, I’ve learned that refinancing a mortgage isn’t just about grabbing a lower interest rate. It’s crucial to consider the time it might take, especially during periods of high demand. If your current mortgage has a flexible rate like an ARM, timing becomes even more critical as you could face higher rates if the refinance isn’t completed in time.
For those considering refinancing, it’s essential to ask lenders about the expected timeline and consider any potential delays. Sometimes, opting for a slightly higher rate but faster processing time can be more cost-effective than waiting for the lowest possible rate.
Lastly, real estate remains an attractive investment, and platforms like real estate crowdfunding offer opportunities to invest in properties without the hassles associated with traditional mortgage financing. These platforms can provide stable returns and allow for significant diversification in real estate investments.
Refinancing has taught me a valuable lesson in patience and the importance of timing, and I hope others can learn from my experience to better navigate their refinancing journey.
