With all the chatter circulating about rates being up, are you feeling like you might have missed the moment? For more information on criteria to help you decide about doing one, see my previous post https://mortgagecanary.com/should-i-refinance/. While my regular news sources are talking about rates going to the 4’s, I’m laughing. Perhaps it’s because I’m an industry dinosaur that remembers when my first car loan was at 18% and I was typing mortgage notes at 11% and 12%. 4% seems pretty dreamy in the overall scheme of things. Despite what all of the doomsday prognosticators are putting out there, I recently locked several clients under 3%. That doesn’t mean you would get that, but it might be close and worthy of exploration.
Other reasons to refinance:
- Getting a divorce or splitting up with a partner – never a fun time but the cleaner you can make it the better off you both are. In order to be as clean as possible, the one keeping the home is going to want to pay out the equity owed to the other and get a new loan without their name on it. Unless you got financing in the last year, chances are you will end up with a better interest rate.
- Taking cash out to buy something. With all of the increase in property values – this is a popular thing. It’s a nice way to access money you have made and use it for something else – down payment on a vacation home, a lot purchase etc. or in preparation for selling/buying in the coming year. Lots of lenders are pushing these for debt consolidation and while that makes sense in some ways and some situations, I would ask you to think twice about if you really want to finance for 30 years that pizza dinner from last week that you put on your credit card? Your home is the four walls and a roof that takes shelters you. Be wise about what you are utilizing your precious equity for.
- Taking cash out AFTER you have made a purchase. In this fast market here in the Portland area, we are seeing a LOT of cash buyers and they are none too slouchy. Two different friends recently sold homes in 6 days and both had cash offers. One at $900k and the other at $1.6M. Not everyone has that kind of cash laying around in the bank but there is an abundance of people who do and they are usually pretty savvy about money. My guess is that they can make more than say even 4% on those funds with good investing. So if you purchased a home for cash, there is an opportunity just after purchase that allows you to take cash out and replenish your bank account.
Types of financing for refinancing can be very accommodating specific to your situation. There are several streamline programs that make it go quickly, sometimes without an appraisal.
VA Loans – IRRRL’s are a great thing for those with a VA loan and it’s guaranteed to improve your situation because the VA has rules about how the loan is done to protect you, the veteran. Here is more about them.
FHA Streamline – If you have a current FHA loan and it’s not reasonable to move to conventional financing then this is a good option to consider. If you have had the mortgage for at least 210 days (required for eligibility), no late mortgage payments in the last 12 months and it must make sense financially to do it – known as passing the Net Tangible Benefit test. No ratio is run and even if you are upside down, it might still go together, particularly if it improves your situation.
GSE loans: Government Sponsored Entities of FHLMC (Freddie Mac) or FNMA (Fannie Mae) often hold the paper. You can find out easily if either of these hold your paper and if they do, then you might be able to do a refinance quickly and skip some steps like an appraisal or income verification. No guarantees on those, but it does happen. To find out if either own your loan – you have to be a conforming loan amount (not Jumbo), you can go to these two links and put in the information and look them out. Recently I actually got an appraisal waiver on a cash out – first ever in years of doing them.
FHLMC takes you to the Freddie Mac Lookup tool
FNMA takes you to the Fannie Mae Lookup tool
Rates are still super attractive and while each rate is specific to your financial picture and your equity position you can always just get a quote if you are unsure if it makes sense. If you want assistance in deciding if it makes sense, please reach out. I make it my business to help you meet your goals or even help you figure out what those might be if you aren’t sure.
Have helped buyers of all types and financial levels and worked on 1000's of loans.
There is always something new!
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