There are plenty of Park City homebuyers
who are likely considering refinancing their homes as interest rates drop significantly. By refinancing for a lower interest rate, you can save potentially thousands of dollars in future interest, reduce your loan term for faster debt repayment, or switch to a loan type that suits your current circumstances better. So, is now a good time for you to refinance your home?
Well, the answer depends on a variety of variables, which we, your Park City real estate experts
, are ready to refer you to local lenders who can help you through the process.
What Home Refinance Options Are Available
The main two mortgage options you are likely to consider are rate-and-term refinance and cash-out refinance. Each has different pros and cons, so it is important to consider your main goals for refinancing your home.
With a rate-and-term refinance, your mortgage interest rate or the length of your mortgage is changed—in some cases, both the interest and length are changed by refinancing. By changing the interest rate from a higher interest rate to a lower rate, you can save hundreds of dollars each year of the remaining life of your mortgage.
As for changing the length of your mortgage, those with 30-year loans can reduce to a 15-year term to help pay off the debt faster, or go up from a 15-year mortgage term up to a 30-year loan to lower monthly mortgage payments.
This type of refinancing enables you to take out a new mortgage on your property. The amount you take out will be higher than what you owe on your current mortgage, with the difference between these two mortgages being paid out to you in cash.
This refinancing option can be especially helpful for those who are preparing to sell their home, as you can use the cash to pay for renovations. That way, you can get your property ready to enter a competitive housing market.
Who Is Eligible To Refinance Their Home During COVID-19
The eligibility requirements for home mortgage refinancing will vary depending on who you go to refinance your loan. Generally, a steady income and good credit score are factors that can help to refinance. Those individuals who have lost their jobs due to COVID-19 will likely find their refinance application denied.
You should also factor in the closing costs of refinancing your home. That’s right, just like when you bought your house, you will also have closing costs associated with refinancing your property. These costs will include:
- Refinance application
- Home appraisal
- House inspection fee
- Title search
- Attorney fee of loan lender
- Points fees
- Origination fee
Also, those individuals who have their home loans in forbearance due to coronavirus impact will not be able to refinance their homes.
Avoid Applying For Forbearance Unless Necessary
Speaking of mortgage forbearance, you should do your best to avoid applying for forbearance unless necessary. For one thing, not all loans will be eligible for the kinds of forbearance that government-backed mortgages are eligible to receive as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Private mortgage servicers are still hashing out how mortgage forbearance and repayment are going to work out, with some considering things like 90-day repayment periods once the forbearance period is over. Also, forbearance doesn’t pause interest accrual, so property loans will continue to grow during forbearance. So, if you have the ability, stick to refinancing your home rather than going into mortgage forbearance.
Jensen and Company are real estate agents specializing in buying and selling properties if you need assistance with a mortgage or refinancing please feel free to contact us for a referral to lenders, attorneys, and more. For more information about forbearance, please visit the CFPB and their information on the CARES Act.