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Is Now a Good Time for Homeowners to Refinance?


Dramatic changes in mortgage rates, which have declined significantly due to the pandemic, can encourage homeowners to consider refinancing their mortgage. It's worth considering if this is a good option for you too! Follow these tips to figure out if it is a financial power move!


1. Find out if/when you will break even.

Experts recommend refinancing if it will provide a homeowner with an interest rate between 50 and 75 points lower than the current mortgage rate, in order to compensate for the closing costs associated with the refinance process. Although, it will take years before the savings from monthly payments accrue and overcome costs. Also, take into account that if you are planning to sell soon it will not be worth it since, in the end, you will pay more in fees than what you will be saving within that time. 

2. Read the loan's term.

Take advantage of this unusual time while mortgage rates are at their lowest point. You can get a new loan with that can lower your monthly payment, pay less interest, and finish your payments sooner. 

3. Closing costs are not something to fear.

Closing costs can make things seem more expensive, or make you feel like you're paying more, but the reality is it's potentially helping you save. That is why we recommend you sit down and do a break-even analysis so you are sure what you can pay on a monthly basis. In addition, consider that those costs don't go away, they are spread out into the loan's payments. Also, it's always key to know your finances thoroughly and without doubt. Money is a game we are all playing, so you should know what's happening.

4.  It is harder to qualify right now.

Since the pandemic, millions of Americans have lost their main source of income. Therefore, many lenders raised requirements/standards to qualify-- including higher minimum credit scores, and lower debt-to-income ratios. 

5. If you have applied and received forbearance,  it will be harder to refinance your mortgage.

The cares act allowed millions of Americans to apply for forbearance, however, this is a reason for disqualifying a homeowner to obtain a loan. You must make three payments after ending the forbearance plan to refinance thru Fannie Mae or Freddie Mac. If the borrower applied for forbearance, but kept paying consistently, they are eligible for a loan.

6. As a final tip, don't wait to see if conditions get any better for borrowers, act fast and pick the rate that will help you the most in refinancing your home sweet home!


You can contact us here with any and all real estate questions!

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