You can begin to reap the benefits of your refinanced mortgage now that all of the paperwork has been completed. After closing, here's what to expect, whether you're getting a lower payment, a shorter term, or cash out.
What Happens to Your Escrow Account if You Don't Pay?
If your prior loan included an escrow account, the money could be returned to you in one of the following ways:
The lender of your former loan may send you a check for your escrow monies. You should anticipate getting these funds within 30 days if you're receiving them by check.
Your escrow funds will be used to pay off your previous loan. This can signify a few things. To begin with, it will reduce the overall amount of debt that must be repaid. Second, you can move your previous escrow funds to your new loan if your new loan has an escrow account.
Your lender will ask which choices you prefer, but we recommend using your escrow funds to pay off your old debt. This will expedite your loan application and reduce the amount of money you'll need to bring to closing.
Making Additional Payments
Making extra payments or paying extra on your monthly payment will save you money on interest and shorten the term of your loan. You can save a large amount of money on interest over the life of your loan by making only one extra payment per year.
How much money might a single extra mortgage payment save me?
Assume you had a $200,000 mortgage with a 5% interest rate over 30 years. This results in a monthly payment of around $1,074 before taxes and insurance.
You would pay around $186,511 in interest over the life of this loan if you merely made your standard monthly payments. However, if you paid an extra $1,074 once a year, you might reduce your mortgage term by 58 months or over five years! You'll save $35,164 in interest over the life of your loan if you do this.