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Hi, I'm Ella Gurfinkel, your host of the AskElla Show and senior loan officer at Fairway Independent Mortgage. On my podcast, I cut through the noise to bring you honest conversations about real estate, mortgages, and financial planning.
I interview industry experts to tackle everything from homebuying basics to complex topics like reverse mortgages, trusts, and market trends. With decades of experience, I'm passionate about dispelling myths and providing clear, actionable advice.
Whether you're buying your first home, refinancing, or planning for retirement, I'm here to help you make informed decisions. Join me for straightforward talk about real estate and beyond!
stop thinking of a refinancing as just changing your interest rate because today I'm going to explain exactly what happens when you refinance and why understanding this process could save you thousands of dollars welcome hi there i'm Ella Gerinkle senior loan officer with 30 years of experience and over 2,000 families served and today we're going to break down what really happens in a refinance don't like or subscribe just yet let's make sure you understand this crucial information first now let me start with a simple answer yes you get a completely new loan when you refinance but here is what nobody tells you about what actually that means for your money first let's break down what happens in a refinance your old loan gets paid off completely a new loan gets created new terms are established new closing costs are involved and your payment history starts from scratch but here is where it gets interesting just last week I had a client who thought refinancing just meant changing their rate they didn't realize they were starting a new 30year term getting a new loan number having their escro account redone and creating a whole new payment structure in addition to getting a whole new loan again whole new loan let me say it again you are getting a whole new loan with a refinance now let me show you what that means in real life your loan term could have been 30 years and now you're 5 years into it meaning you have 25 years remaining after refinance if you opt in for a new 30-year loan you're looking at a whole new loan starting over at 30 years unless you choose a shorter term and you have options here is what this means for your money on a $400,000 loan original loan amount 25 years left new 30-year loan five more years of payments difference in interest could be about $50,000 or more depending on your interest rate but here is what's most people don't realize about refi your escrow account your old escrow account gets closed out and you get a refund usually within 4 to 6 weeks directly from the old lender to you in a form of check mailed to your house yes the check is legit that's one of the biggest questions and one of the most frequently asked questions I've gotten from clients who I've refinanced over the years i received a check in the mail is it legit is it real question is who the check is from oh it's from your old lender yes you can absolutely take it to the bank as a matter of fact you should run to the bank with that check because that's your money that the lender got to use for a time being now being refunded to you so yes legit yours go deposit take your money back but the kicker is that whenever you refinance and when you have a tax and insurance escro account the new account gets established so you might need money to fund it at closing so another real life example here last month a client refinanced old escro balance was $3,000 got refund after closing 4 to 6 weeks after closing mind you but needed 2500 for the new escro account i always give them a choice either you bring the cash in and then wait for the refund or you roll that new escro account into your new loan if you need more information on that please comment below and I'll be more than happy to break it down for you but typically funding the new escro account can be done in multiple ways but your refund from the old one will not come for a while keep that in mind it's not instantaneous about 90% of the time now let's talk about your payment schedule the most commonly thrown term around is that when you get a new mortgage and refinances a new mortgage once again you get to skip a payment not really let me tell you why your interest portion of your monthly payment is always collected in a rears meaning when you make your April payment you're actually covering the interest for March when you make your May payment your interest actually carries back to April and so on and so forth you get the gist so it does make it appear like you're skipping a payment and yes the gap between the closing date and the first payment due date may be 30 days maybe 45 days in some cases it can be fairly close to 60 days but you're still paying for every day you have the loan so from the date of closing you're actually paying interest through the month's end in which the closing occurs and that's your prepaid interest on your estimated uh closing statement on your final closing statement on your CD closing disclosure so no friends you're not really skipping a payment you're just paying a part of it up front and then the rest of it rolls backwards every time in a waterfall effect when you start making your regular monthly payments here's what you absolutely must know before even thinking about refinancing your new loan amount might be higher than the current loan balance that you currently have your term does start over unless of course we discuss a shorter term for the loan with a qualifying statement you have to qualify for a shorter term your payment due dates might change technically your mortgage payments we're talking about first mortgages here technically your mortgage payments are always due on the first of the month but you have a 15-day grace period where no late fees are assessed so technically you could make your mortgage payment by the 15th or 16th of the month without getting any late fees assessed against you your escro account starts from scratch so the biggest mistake I see people refinancing without understanding how it affects their long-term financial goals sometimes a lower payment isn't worth over starting over for 30 years if you want to know what your specific options are let's have a conversation and I'll break it down for you and I will show you what the actual costs are what you will or won't save if you refinance because just like any financial product a refinance is not always for everybody a refinance doesn't always make sense depending on your life's goals depending on your immediate and not so immediate plans so let's have a conversation in the meantime comment below and I'll see you on the next one