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Refinance. Close on Feb28 or March 2nd?

I am doing refinance the same bank.  I have a choice to close on Feb28 or March 2nd.  Which option is better for me in term of prepay interest for new loan and old loan.  Very appreciate for your help.

Thanks

  • February 08 2009 - West San Jose
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Answers (5)

Thuanhoang. .   Ask the bank to explain and provide the details on the differences between drawing the documents with an April1 first payment or a May 1 first payment.  I can see that asking advise here is only going to confuse you.  The bank is more than qualified to clarify the difference for you.        

  • February 08 2009
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Actually, it does matter how the loan was structured and what the client expects to happen at closing. Thuanhoang, come back on here and say how your Good Faith Estimate reads. If you are supposed to pay 0 at closing, then you need to do a short pay and fund by the 5th. If you fund on the 6th without a short pay, you will be paying a months interest at closing. If the loan was structured with you paying a months interest at closing and you fund on the 6th, then you will pay 2 months of interest at closing. It's not 6 of one, etc. Docs are drawn according to how someone tells them to draw them, not by chance. 

  • February 08 2009
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It really doesn't matter on a refi... the old interest stops when the new loan pays it off.  The new loan starts on the day it is funded.  You will have to pay the March payment at closing and the new first payment will be either April 1 or May 1 depending on how the docs are drawn.  If you want to skip a payment (add 30 days interest to the new loan) then go for the March close / May 1st payment.  Otherwise same same . . . 6 or 1/2 dozen 

  • February 08 2009
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I agree with his dates except when you close on Feb 28, and fund on 3/5, the lender will do what's called a short pay( if you request it ) and your 1st payment will be due 4/1. If you close on 3/2 and fund on 3/6, then that will result in what he described with your 1st payment due on 5/1. If your new loan amount did not include 2 months of interest, you will have to pay 1 months of interest at closing. If your new loan amount only includes 1 months interest, then take the short pay and if your origainal GFE had you bringing no money to closing, then it will stay that way. Also, if you happen to have an FHA loan, you must close AND fund by 2/28.
  • February 08 2009
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When you are refinancing a mortgage, you will pay interest on the old loan from the date of last past payment until settlement on the new loan. You will also pay interest on the new loan from the date of settlement until the last day of the month. If you are refinancing a mortgage for an owner occupied primary home, you also have a 3 day right of rescission. That means your new loan won’t fund and the old loan won’t be paid off until after the 3rd day passes. The day you sign does not count. Sundays and holidays also do not count, but Saturdays do.

February 28th is a Saturday. So, your 3 day right of rescission expires at midnight on Wednesday March 4th and your new loan funds on Thursday March 5th. If you close March 2nd, your 3 day right of rescission expires on Thursday, March 5th and your new loan will fund on Friday March 6th.

So, in this case, is does not matter if you close on February 28th or on March 2nd. Your new loan won’t fund until March, and you will pay interest on the new loan until the end of March. Your first payment will be May 1st.

  • February 08 2009
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