Refinancing - a Question of Timing

A Home Buying Article Contributed by Robert Scalia

Why Refinancing is Best Achieved with Perfect Timing

The simple truth of the matter is that when your are refinancing your mortgage with another lender, you will always end up paying at least a day or two of overlapping interest on not one but both loans.

This may sound like someone is cheating you, but this is simply not the case. When it comes to refinancing, this is simply the way the system works. Lenders and other financial institutions often try to shorten the period that you are responsible for these overlapping interest payments and will often boil their policy down to a simple catch phrase: Don't fund on Fridays.

But as is the case with any other refinancing or mortgage issue in general there is a little more to it than that. What you want to do is make sure that your refinancing transaction is funded early in the week and as quickly as possible - oh, and never before a paid holiday.

Why is Timing and Refinancing Two Things That Go Hand in Hand?

Why is this. Simple. In any refinancing transaction, the new lender funds the loan by actually wiring money to the bank of the mortgage broker or attorney who is responsible for distributing the money you are requesting. The clock starts ticking and your meter starts running the second the new lender sends that money over.

Keep in mind that the old lender will not get the payoff money immediately. In some states like California, good funds laws will require the escrow agent to hold onto the money overnight. That doesn't bode to well for your overlapping refinancing payments. There might also be paperwork to fill out at the title company or the county recorder's office, which will also slow the process down considerable..

Then the escrow agent proceeds to pay off the old loan by sending a cashier's check by overnight courier. While it's the cheaper option for the lender, you are paying for this hassle-free method of transfer all the while.

So How Can You Avoid This Refinancing Quagmire.

So you are looking to beat the refinancing system. Well, picture this more optimistic scenario.

Your new lender wires the money to the bank of the escrow agent on Monday. What happens then? The escrow agent can fedex the cashier's check that same day to the old lender,. That means he will receive it on Tuesday and stops charging interest. That means you will pay overlapping interest only on Monday.

But if you made the same mistake others make and funded you refinancing loan on a Friday, than it is very possible that the old lender will get the check on Monday, which means that you have paid refinancing interest on Friday, Saturday and Sunday.

If you think paying those extra two days when refinancing your mortgage is a big deal, then don't do it. There is no reason why refinancing has to be anymore expensive than it already is. Refinancing shouldn't be a burden.