Refinance Now, It’s Not too Late

Refinance Now, It’s Not too Late

Since May 2019, mortgage rates have been below 4 percent. With historically low-interest rates, you would think homeowners would take advantage and refinance to save money. However, a recent Lending Tree survey said that 49 percent of homeowners say they are considering a mortgage refinance in the next year. The report also estimated that over a third of the homeowners have original mortgages above 4 percent and 11 percent of homeowners didn’t know their existing interest rate.

In 2020 when interest rates hit their historical low, slightly more than a third of the people surveyed regretted missing the opportunity to refinance. But you should not beat yourself up about it because the only way you are going to know it hit the bottom is after the rates start going back up.

Current mortgage rates are very favorable to borrowers and some economists do believe that when you factor in inflation, the rates are very close to zero effectively.

Here I will show you nine specific reasons why people choose to refinance their homes. Two of the most important reasons are lowering their monthly payment and pulling cash out of their equity. Here are other reasons:

  1. Lower the payment
  2. Lower the rate to pay less interest
  3. Shorten the term to pay off the loan sooner
  4. Take cash out of equity to pay off higher-cost debt
  5. Take cash out of equity to improve their liquidity
  6. To remove a person from the loan as in a divorce
  7. To combine a first and second mortgage
  8. To replace an adjustable-rate mortgage
  9. To consolidate debt

Here are some commonly held myths about refinancing:

  • You can only refinance your home once.
  • You must refinance through your current lender.
  • There should be a two-percent difference in the rate to justify it
  • You need 20 percent equity to refinance
  • Applications require a lot of documents
  • You need cash to cover closing costs
  • You won’t save that much by refinancing
  • It’s free to refinance

The truth. If you currently have an FHA mortgage, there is limited borrower credit documentation and an underwriting program. Your mortgage must be current, not delinquent and your refinance must have a net tangible benefit to you, the borrower, like a lower rate, lower payment, or better loan terms. If you need more information, I can put you in touch with an FHA-approved lender who can help you streamline your FHA mortgage.

If you have a VA-backed existing home loan, there is a similar program. The purpose is to help the borrower reduce their payments or make their payment more stable. You must certify you are currently living in or did live in the home covered by the loan. It is called the Interest Rate Reduction Refinance Loan or IRRRL.

The U.S. Department of Agriculture has a program for current USDA direct and guaranteed rural homebuyers who have been current on their payments over the last 12 months prior to making the request. No appraisal or credit review is required. There must be a minimum of 40 percent net reduction to the PITI payment. I can set you up with a qualified lender for more information.

Before you go through the process of refinancing your home, review and decide how long you are going to keep the home. If your reason for refinancing is a lower interest rate, then that will be immediately accomplished. But if you plan on selling soon, you might not be able to recapture the cost. Contact me at (703) 303-4010 and we can have a conversation about your options.

There are costs associated with refinancing regardless of whether you pay for them in cash, or they are rolled into the cost of the mortgage.  These costs can range from two to five percent of the mortgage.

Check out the Refinance Analysis to determine your breakeven point and savings.  Call if you have questions or want the recommendation of a trusted mortgage professional.

I can provide Insider Information on Fairfax VA homes for sale. Get you a FREE Market Snapshot Report of Your Northern Virginia Home’s Value, or  Search All Northern Virginia Homes For Sale. Put that data you need at the tips of your fingers!

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