Can You "Always" Refinance?
Maybe you have some home renovations you’d like to do, or perhaps you are looking at ways to consolidate your debt. “You can always refinance your loan,” a friend or family member tells you. “I did it, and I was able to put in a new kitchen. It’s easy!”
Let’s turn the phrase around. When you’re buying a home and interest rates seem to be high, be wary of anyone – including your real estate agent – who says, “You can always refinance.” They may say that, but I advise you to hear it as, “You may be able to refinance at some point in the future.”
Refinancing –
The process of replacing an existing loan with a new one, often to secure better terms – can be a good way to lower your interest rates, have lower monthly payments, or help you access your home equity to make home repairs, perhaps, or consolidate debt. However, there are circumstances where refinancing just may not be the best option for you, such as:
- Varying mortgage financing guidelines and qualifying factors (including appraised value). We can only ever know what these variables look like based on today. We can’t take today’s facts and express them as truths for some future point in time. Also, as a blanket statement, the “you” that’s being referred to is everybody. That’s like saying nobody, anywhere, is ever going to lose their jobs, get laid off, experience an illness or potential disability, have their credit score go down, etc.
- You’re planning to move soon. If you’re planning to make a move and sell the house soon, does the refinance negatively impact you? Are you using cash-out to buy your next property all-cash? Will you be able to sell your existing home for more than the new loan balance, or will the new loan impede you from selling your current home when that time comes?
- Property values are declining based on appraisals. Even if your home value has not decreased, most lenders will cut back on the maximum loan-to-value allowed if the “declining market” box is checked in that section of the appraisal.
The bottom line is that all scenarios need to be planned out based on specific and individual facts – as well as the unknown and uncontrollable factors.
Approved for refinance or not, only you know your budget and what you can afford. It’s wise to ask yourself these questions:
- What is the total amount of your monthly payments pre-finance vs. the cost of the refinance?
- What will your total monthly payments be after the refinance?
- How long will it take until your current mortgage loan is paid off – and does it really make sense to add on a significant number of years to the term of a new loan? (Interest can really add up over time!)
Remember:
Knowledge is power when thinking about refinancing your home. You can make informed decisions when you have information – avoiding pitfalls and saving money to ensure a stress-free future.
Homebuyer and Mortgage Financing Tips: Navigating the Homebuying Process
As a REALTOR® and licensed real estate broker with 25 years of experience in the real estate industry, I specialize in guiding homebuyers through every step of purchasing a home – from the initial search to closing their transaction. Whether you’re a first-time homebuyer or moving up to your next home, it’s important to keep some key homebuyer and mortgage financing tips in mind as you navigate the process. This information is absolute GOLD as far as education about qualifying for a mortgage loan.
Start by determining how much home you can afford, factoring in your monthly budget, debt-to-income ratio, and down payment. Getting pre-approved for a mortgage can help you narrow down your options and ensure you’re looking at homes within your price range. Additionally, understanding the different types of mortgage loans available, including conventional, FHA, and VA loans, can help you make an informed decision about which loan best fits your financial goals.
When applying for a mortgage, your credit score plays a significant role in the loan terms you’ll receive. Higher credit scores generally lead to lower interest rates, which can save you thousands of dollars over the life of the loan. If you’re unsure of your credit score, take steps to improve it before applying for a loan by paying down outstanding debt, checking for errors on your credit report, and avoiding large purchases that could impact your score.
With 25 Years of Local Experience in Real Estate and Mortgage Financing
I bring 25 years of total experience in the real estate industry, including 15 years in residential home mortgage origination. This combination of expertise allows me to provide homebuyers with a unique perspective on both the real estate and financing sides of the equation. Whether you're securing a home loan or simply seeking expert advice on the homebuying process, my deep understanding of the local Studio City real estate markets and greater Los Angeles markets enables me to guide you through every step. From navigating mortgage applications to understanding the nuances of today’s market, my goal is to ensure you have a seamless, informed, and successful homebuying experience.
