Blog - Maybe You Should Just Refinance Your Real Estate
Here Evelyn Bruder writes to folks who are not quite ready to buy new real estate, but want to take advantage of record low interest rates. We agree that if it's not the right time for you to buy then we'd rather you wait. We'll be here when it's time.
It may seem counter-productive for me to suggest that refinancing may be a better decision for you, but the truth is I only want you to buy real estate in Las Cruces if it's the right thing to do. The truth also is that I recommend buying real estate in Las Cruces right now if you fall into that category. We may never see a buyers market like this again.
However, for those of you considering refinancing, here are 6 things to consider.
1. Credit score and income
Most banks require you have a credit score of at least 620 to refinance and you must prove that your household finances haven't changed much.
2. Interest rates
Refinancing could help borrowers whose mortgage rates are higher than 5.5%. If you qualify for current average rates, you could save a percentage point or more on an outstanding mortgage.
3. Costs
Borrowers typically pay about 2% of the new loan amount, which includes application, appraisal and inspection fees. On a $300,000 mortgage, refinancing would cost around $6,000.
I hear that typically, costs top out at around $10,000, even if the home's price is $1 million. Regardless, that's a conversation you should have with your lender.
Included within refinancing costs is the new escrow account you'll need to set up. The lender sets up this account for home-insurance and property-tax payments. In most cases, borrowers must put the money for these expenses into an escrow which the lender withdraws
from annually.
4. Adjustable-rate mortgages
Homeowners with an adjustable-rate mortgage scheduled to reset this year should decide whether to stay with it or refinance into a fixed-rate mortgage. It's a risk either way, just like it was when you signed up for it originally.
5. Greater pricing disparity
Rates offered for refinancing vary widely, based in part on borrowers' credit score. Lenders look at the state's average loan-to-value ratio and the percent of homes with negative equity. The higher these numbers are, the higher the rate a borrower is likely to be offered.
In addition, to manage the spike in refinancing applications, some lenders are increasing pricing to slow down the number of applications they receive while making more money on each transaction.
When shopping for a refinance, include a variety of lending options, such as independent mortgage brokers and credit unions, which may have had fewer subprime-mortgage losses and could be eager for new business.
6. Is it a buyers market?
The final thing to consider is whether or not the market is a buyers market. If there are more sellers than buyers that means sellers are competing more than usual. If this is the case, then buying real estate may be better than refinancing. However, in this situation you will probably also have to become a seller. Talk to a Realtor to determine if your home is more competitive than the rest of the market. If it is then you should strongly consider selling and getting into the market to buy real estate at record low interest rates.
For all of your Real Estate needs
The Evelyn Bruder Team is here to assist you.
Evelyn Bruder, CRS, GRI, ABR, E-PRO, Las Cruces' Only Cyberstar
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