Oftentimes in crisis we make less than the very best of decisions. Our thoughts may be swayed by news media or social media or even family and friends, who all have an opinion. What I’d like us to think about is what opportunities will be coming our way when everyone around us is near panic. What we are NOT suggesting is “how can we take advantage of someone because of their circumstances.”
One opportunity that could be part of your strategy going forward is to refinance your mortgage. The Federal Reserve dropped the interest rate because of the Virus to ZERO. Rates at zero by the Fed does not mean you will get 0% ( wouldn’t that be nice!) This may reflect lower rates on new mortgages.
When you refinance, your old mortgage is paid off with the new mortgage.
If your mortgage has been around for a while and if you still owe half or more of the total, you might be well advised to investigate a new mortgage.
1-2% drop in your rate over time can make a huge difference in your overall cost to own your house.
Our recommendation will be a 15-year fixed-rate mortgage.
If you’re serious about obtaining a new lower interest rate mortgage, make sure you submit a loan application.
Some mortgage companies are stating their rates publicly at TOO HIGH a rate to slow down the swarm of people asking for a lower rate.
To find the true lowest rate an application is essential.
A word of warning, Please do not consider rolling other debts into your mortgage, like Credit Cards, student loans etc.
Just don’t do that. It makes paying off debts that we can show you how to tackle, take way too long to get out from under. Mortgage is house only.
Home equity lines of credit are oftentimes strongly suggested by some mortgage companies, especially if they are based in a bank. These loans are dangerous. Think of a home equity line of credit like a Credit Card on steroids. Steer clear of them, just say no thanks.
Here are the items that lenders will be looking for:
- A Maintained Original Mortgage; Have you paid on time as promised?
- Equity; Does your home have 10-20% equity
- Income; Do you have a regular income stream? (What is your debt to income ratio?)
- Credit Status; Lower credit scores will likely result in higher interest rates.
When to refinance your mortgage?
- When you have an adjustable rate mortgage
- The length of your mortgage is over 15 years
- You have a high interest rate loan
- Your second mortgage is more than half or your income(Second mortgages are dangerous territory, we do not recommend)
The cost to refinance is usually 3-6% of the loan amount, so make sure you love this house and will own it for 3 years or more before refinancing.
Always ask for a par quote or zero quote to avoid extra cost like mortgage points fees.
Warning!!! If your refinance helps your cash flow by lowering your monthly mortgage payment, use that extra money to pay off smaller bills. This is not the time to jump backward by buying another debt.
If we can help you navigate this process, please feel free to contact us at:
www.themoneycoaches.com
rich@themoneycoaches.com
kathy@themoneycoaches.com
chris@themoneycoaches.com