Mortgage questions: don’t resist … I insist | Home / Real Estate
Are you resistant to refinancing your home? Truly? Even if all the financial geniuses alive tell you to do it yesterday?! Is the paper work too much to handle right now? Doesn’t it seem like the difference between your current interest rate and that promised by mortgage companies, on TV and in the print media, isn’t enough to go through the process? Has your job been suspended? Perhaps your income has been reduced, or the thought of having to deal with banks and other sources during this pandemic is overwhelming.
Please read on. I will convince you that you simply cannot wait for another day to take advantage of this unique time in history. The benefits are just too great to miss.
For starters, refinancing is the process of getting a new mortgage by changing the terms of the one you already have on your home. You may be thinking about refinancing your mortgage for several reasons, such as taking advantage of lower interest rates, changing mortgage companies, reducing monthly mortgage payments, or using the refinancing money on a big purchase. Don’t worry: refinancing doesn’t mean you end up with two mortgages. Instead, your first loan is technically paid off through the refinance process and a second loan is created in its place.
All of these interest rate changes are aimed at stimulating the economy in the midst of the pandemic. We have to thank the Federal Reserve for lowering interest rates by half a percentage point in early March 2020 and then lowering them again mid-month to between 0% and 0.25%. Zero percent is pretty eye-catching, but keep in mind that doesn’t mean you can get a mortgage with 0 percent interest. (Would not this be nice?)
If you already had the idea of refinancing, these low rates couldn’t have come at a better time. Getting a mortgage with an interest rate cut of up to 2% can make a huge difference in your monthly budget and your ability to pay off your mortgage. faster. And if you’ve been thinking about refinancing your current mortgage to a 15-year fixed rate mortgage, that’s fine too. Now is the perfect time to do it!
So, you’ve decided to put your “containment depression” aside and explore these insane low rates. You will need to apply for a loan, just like when you applied for your original mortgage. To see if you will qualify, you will need to extract some paperwork to make your case. Lenders look for different things, but in general we want you to meet the following conditions:
An initial mortgage maintained. Lenders need proof that you have maintained and paid off your original mortgage for at least 12 months before considering refinancing.
Equity. It is best to show that you have at least 10 percent of the equity in your home.
Returned. You have to prove that you have a regular income, and lenders will also look at your debt-to-income ratio. Basically, they want to make sure that you can pay off based on the amount of money you earn and that any existing debt payments you have won’t interfere with your refinanced mortgage payment each month.
Credit status. Having a lower credit score can result in higher interest rates.
With rates this low, it’s worth taking the time to see what works best for your specific situation. And you’ll sleep better knowing you’re making informed, thoughtful decisions for yourself and your family, and not just hitting the bandwagon.
Jim Gay has been a real estate broker for 20 years and has been a financial consultant to Fortune 500 companies. He is currently President of The Mortgage Place (505-986-9080) and can be reached at [email protected].