As soon as rates go up, there is an abundant number of articles and news reports saying that refinancing is dead. Refinancing is not only a rate-based decision, and there are many reasons to consider refinancing.
For those borrowers who missed the opportunity to refinance for various reasons, there is always an opportunity to refinance if the numbers make sense enough to move forward. There are three key changes in the last several years that may now open refinancing options for the following borrowers:
1. Borrowers who may have damaged their credit, for many different reasons, may have passed the required seasoning period (waiting time after occurrence) with improved credit. Seasoning, along with improved credit scores, opens the door to possibly refinancing or buying again.
2. The unemployed may now be employed or self- employed (for at least two years).
3. Those with significant appreciation in their property.
Additionally, many owners can now:
A. Sell their home at a higher price and downsize.
B. Refinance, lower their payment, rent their current home and relocate to a lower-priced rental.
C. Refinance due to a higher value and improved credit scores.
A combination of a lower rate and mortgage insurance elimination can lower payments.
A rate can be the same or higher and still lower your payments.
D. Consolidate credit card and education debt into one mortgage loan to lower the total payment.
E. Switch from a 30-year fixed rate to a 15-year fixed rate or a lower-rate adjustable mortgage. (Suggestion—take an adjustable mortgage if you plan on moving or paying it off before the adjustment period.)
F. Offset lack of equity by:
Borrowing with lender-paid mortgage insurance, which is inexpensive.
Taking a Harp mortgage.
Building equity into their home. Refinance into a one-time close construction loan. You can build equity and lower your mortgage payment in one shot.
G. Pay off an existing mortgage with a reverse mortgage and free up cash (great product for the right people over 62 years old).
Well, now you know the answer to the title of this article—NO. Refinancing is not dead! Refinancing is alive and well, so take advantage if it’s right for you.
Carl E. Guzman, CPA, is the president and founder of Greenback Capital Mortgage Corp., a Mortgage Broker/Banker in New York, New Jersey, and Florida, celebrating over 32 years of assisting borrowers with their financing needs. He is a CPA by training and a Licensed Real Estate Broker in New York and New Jersey, specializing in complex residential and commercial mortgage solutions.
