Lessons Learned From Refinancing

I lost my refinance virginity a year ago.

After a bit of a dry spell, I’m back at it!

I’ve been in my current house hack for about a year and a half. Since moving in, I’ve refinanced it twice. The first was a cash-out refinance. The second was a rate-and-term refi. 

Going through both taught me A LOT. While I made some mistakes, each one ended up being worth it, so I wanted to share the biggest lessons I learned along the way. 

Ever been in one of those group texts that never stops buzzing and gets annoying real quick?

I thought it was that, but it was a friend blowing up my phone about refinancing. So I checked rates and realized I could drop my mortgage from 6.3% to 5.3% on a 5-year ARM. 

I wasn’t planning to refinance, but I started the process that day to lock it in. Sadly, my friend hesitated and missed the window. Within days, rates were back near 6%. Perfect clarity can cost you money: always strike when the iron’s hot!

Give your lender exactly what they ask for, not more. Anything extra just gives underwriting more to question.

On my first refinance, I showed three bank and investment accounts. Bad idea. The underwriter flagged all kinds of transfers and payments, even normal ones, which dragged the process out. The second time I refinanced, I only showed one low-activity account. It saved days on back-and-forths. 

The definition of insanity is doing the same thing over and over again and expecting different results. That’s basically what I did with my refinances.

I used the same lender twice, which also meant I got the same appraiser twice. She was extremely conservative both times and wouldn’t budge even after sharing higher relevant comps with her. This hurt my cash-out refinance big time.

Now compare that to my dad’s experience. He recently had an appraisal come in low, but after one call with the appraiser, the value was increased by $20,000. Same general process, completely different outcome.

At face value, appraisers appear to be luck of the draw until you realize lenders use the same ones over and over again. I should’ve known that. You usually can’t choose the appraiser, but you can choose the lender, and sometimes that choice matters more than you think.

As much as we all hate it, tax season always comes around. 

I handed everything to my accountant and realized I couldn’t find the documents from my previous lender. That almost cost me, because I was missing about half a year of mortgage interest I should’ve been able to write off.

Learn from my mistake: keep your old lender login, download your final mortgage statements and 1098, and save them somewhere easy to find. Future you does not want to be digging through old accounts in the middle of tax season!

Your new loan comes with a new escrow account, but your old one doesn’t just disappear.

You should get a refund check from the lender you refinanced out of, and it can be a pretty substantial amount. Keep an eye on it. If you don’t advocate for your own money, it’s easy for things like that to get lost in the shuffle.

One of the best things about a value-add house hack is optionality. By improving the property and forcing appreciation, I gave myself more than one move to make when the time came to refinance. 

The first time, I used a cash-out refinance to free up capital that otherwise would’ve stayed locked in the property. The second was purely opportunistic and let me lower my rate. That’s why flexibility matters. Markets change, rates change, and your priorities change. The more equity you create, the more options you give yourself when it’s time to act.

Planning to get another house hack under your belt? See if it’s beneficial to refinance before you move out.

You can only get owner-occupied loans while you live in the property (duh). That advantage is a big one because primary residence financing is usually far cheaper than investment property financing. Once a house becomes a rental, your rates will get crappier so don’t hesitate if you have the chance to improve your position.

You never know when the right window to refinance is going to open.

Maybe rates dip. Maybe you finish a renovation. Who knows? Selfishly, I wrote this as much for myself as for anyone else. I don’t want to reinvent the wheel every time a refinancing opportunity comes up. You shouldn’t either. Use this as a building block and keep adding to it as you learn.

Share this with anyone you know going through a refinance. And if you’re in the middle of one yourself, tell me what I missed!!!