Avoid “Double Interest” Payments At Closing: An FHA Streamline Refinance Closing Calendar For 2014
For U.S. homeowners using the Federal Housing Administration's FHA Streamline Refinance program, it's best to close as close to the end of a calendar month as possible. Doing otherwise can cost you hundreds of dollars in "double-paid" interest.
The date on which you close your FHA Streamline Refinance matters. Choose wisely to save money.
What Is An FHA Streamline Refinance?
The FHA Streamline Refinance is a special refinance program available only to homeowners with FHA-insured mortgages. Homeowners with VA loans, for example, are not eligible.
As defined by the FHA, the FHA Streamline Refinance is a reduced-paperwork, verification-free, appraisal-less refinance program meant to lower a homeowner's monthly mortgage payment by 5 percent or more monthly.
Homeowners must be current on their mortgage to use the FHA Streamline Refinance, and must have made at least 6 payments on their FHA-insured loan in order to be eligible.
The FHA Streamline Refinance is available in all 50 states and allows for loan sizes of up to $729,750 in certain high-cost areas including Loudoun County, Virginia; San Jose, California; and Montgomery County, Maryland.
In high-cost areas, in which multi-unit homes are common, FHA loan sizes can range even higher. In Brooklyn, New York, for example, a 3-unit home can be streamline refinanced with loan sizes up to $1,129,250; and streamline refinancing for a 4-unit home is available for loans up to $1,403,400.
For FHA purchase loans, the 2014 FHA loan limits range up to $625,500 only.
Time Your FHA Streamline Refinance Closing
Because of its limited paperwork, the FHA Streamline Refinance can be among the simplest, fastest refinance programs available.
According to FHA guidelines, the streamlined refinance requires no appraisal to commission; no income to verify; and no credit to review (although some lenders ask for tax returns as a risk-limiting measure).
FHA-to-FHA refinances routinely close in 20 days or fewer.
But just because you can close an FHA Streamline Refinance quickly doesn't mean that you should.
There's a little-known quirk in the FHA program which gives a mortgage lender permission to collect an entire month's worth of mortgage interest, regardless of the loan's actual payoff date. Pick the wrong closing date and you might be forced to "double-pay" up to 31 days of prepaid mortgage interest.
Conventional and VA refinances don't have such a rule.
Here's how it would work in real-life. Assume a homeowner in Chicago, Illinois is using the FHA Streamline Refinance to refinance a $250,000 mortgage; and assume the homeowner's new FHA loan will fund on the 15th of the month.
Because of how the FHA Streamline Refinance rules are written :
- 15 days of per diem interest will be paid to new lender, to cover the rest of the month
- 30 days of per diem interest will be paid to old lender, because the FHA prescribes it
The homeowner who funds an FHA Streamline Refinance on the 15th day of the month, therefore, is paying 45 days of mortgage interest for 30-day month. This is a double-payment of 15 days of mortgage interest. Or, in this case, $360.
The better plan is to fund the the loan on the 30th of the month such that only 1 day of mortgage interest is paid to the new lender, reducing the total interest paid to 31 days. This saves $335.
2014 FHA Streamline Refinance Scheduling Calendar
FHA mortgage rates are low and the FHA Streamline Refinance remains in high-demand. If you're among the many FHA-backed homeowners planning to refinance this year, then, make sure to close on the best date possible.
Here is an optimal FHA Streamline Refinance closing calendar for the rest of 2014. Use these closing dates to minimize your "double interest" paid.
The guide assumes that your home is a primary residence such that the 3-day right of rescission applies.
- January 2014 : A Monday, January 27 closing will fund January 31, 2014
- February 2014 : A Monday, February 24 closing will fund February 28, 2014
- March 2014 : A Wednesday, March 26 closing will fund March 31, 2014
- April 2014 : A Friday, April 25 closing will fund April 30, 2014
- May 2014 : A Friday, May 23 closing will fund May 30, 2014
- June 2014 : A Wednesday, June 25 closing will fund June 30, 2014
- July 2014 : A Friday, July 25 closing will fund July 31, 2014
- August 2014 : A Monday, August 25 closing will fund August 29, 2014
- September 2014 : A Thursday, September 24 closing will fund September 30, 2014
- October 2014 : A Monday, October 27 closing will fund October 31, 2014
- November 2014 : A Monday, November 21 closing will fund November 28, 2014
- December 2014 : A Friday, December 26 closing will fund December 31, 2014
Note that closings for FHA non-owner occupied properties, rental homes, and other properties not subject to the 3-day right of rescission. Closings for rentals should be scheduled for the last business day of the month, whenever possible.
Get FHA Mortgage Rates Now
There's a right and wrong time to close on your FHA Streamline Refinance. Closing at the end of the month can save you the most money. Your mortgage lender can help you coordinate, and you'll maximize your savings.
Planning to refinance via the FHA? Compare your options online and get a live rate quote now.