Right now, we live in a time of economic uncertainty. The full scope of COVID-19’s impact is hard to predict. As a result, many homeowners are now asking themselves a critical question, “Should I refinance my mortgage?” The short answer: It depends.
As one of the top lending experts in the greater Vancouver, WA area, The Domench Team can help you determine if refinancing is right for you and your family. If the answer is yes, refinancing with us can make the process simple, smooth, and successful. We pride ourselves on providing our clients and community with an exceptional and personal lending experience.
What Is a Mortgage Refinance?
When you refinance your home, you are essentially replacing your existing mortgage with a new, more favorable one. Refinancing allows you to potentially switch servicer’s and change the terms of your mortgage. The most common reasons to refinance include:
- Lower monthly payments
- Secure a lower mortgage rate
- Adjust the length of the mortgage
- Tap into some of your home’s equity for other expenses
- Switch lenders
- Change from a fixed-rate to a variable-rate loan or vice versa
Many of our clients are happy to find out that refinancing usually requires much less paperwork. The loan can also be closed much faster than your initial mortgage, depending on the way you refinance. Generally speaking, there are three types of refinancing: cash-out, cash-in, and rate-and-term. The type we recommend depends on your individual situation and goals.
When you replace your loan with one that is higher than your current mortgage balance, you can withdraw the difference, or “pull the cash out.” Many people choose a cash-out refinance to help pay off other bills like high-interest credit cards. Others might choose to refinance if they need a lump sum to remodel their home. Ultimately, a remodel can increase the equity in your home, making the refinance worth it.
It is important to note that there is a limit to how much you can withdraw. Most banks won’t let you tap more than 80% of your current equity. Some banks limit the amount to $250,000, while others may require a higher credit score. There is a certain amount of risk when a bank agrees to a cash-out refinance, and they need to protect themselves.
As you can probably guess, a cash-in refinance is the opposite of a cash-out refinance. Those who choose a cash-in refinance agree to pay a lump sum towards their existing mortgage balance. This can help shorten the term and lower your mortgage rates.
Many of our clients opt for a cash-in refinance to eliminate their monthly private mortgage insurance, or PMI. PMI is mandatory for those who put down less than 20% as a down payment when they bought their home. Reducing your mortgage’s loan-to-value ratio, or LTV, to 80% can save you thousands of dollars a year in insurance payments.
This can also be accomplished via a Loan Re-Cast which does not require a refinance. We are one of the few lenders nationwide who allow this on our transactions- call us to find out more!
The final type of “refi” is known as rate-and-term refinance. Right now, in the age of COVID-19, rate-and-term refinance is the most popular solution. This is largely due to the historically low interest rates.
Homeowners who choose rate-and-term refinance can reduce their fixed-rate mortgage from 30 years to 15, which helps you pay off your mortgage sooner. Or, you can choose to take advantage of the lower interest and lock in a rate. In some instances, you can even cash out some equity, but not much, usually no more that $2,000.
The fragility of the economy and high unemployment rates have many people scrambling for money. Homeowners with equity have the opportunity to ease these burdens through rate-and-term refinance.
When Should I Refinance My Home?
The Federal Reserve, or “The Fed,” has recently taken action and lowered short term interest rates. As we previously mentioned, 30-year fixed-rate mortgages are currently at historic lows. Why? Lower rates are designed to help support the national economy and provide homeowners with a path forward in the face of financial hardships.
As a result, many homeowners, not just in Vancouver but across the country, are choosing to refinance right now. Making the right moves during this unprecedented time of uncertainty, can help secure your family’s future. This is where The Domench Team comes into play.
We can help you determine if refinancing is the best solution for your specific situation. We can help you successfully reduce mortgage payments or tap into your home’s existing equity. And, we can help you navigate the volatile housing market and address the financial fallout of a fragile economy.
Considerations Before Refinancing and COVID-19
We here at Team Domench also want to emphasize that we will always put your needs first. We want to come up with the best possible solution for you. In other words, we help our clients make informed decisions, even if that means that refinancing is not the right choice.
How Long Have You Owned?
Refinancing may seem like a no-brainer due to low interest rates, but there is more to consider than just a cheap rate during the age of COVID. The first thing to consider is how long you have owned your home. If it’s only be a couple years, you may not have enough equity built-up to make refinancing worth it.
If the objective is to reduce your monthly payments, our team will ensure the new interest rate is low enough to justify the closing cost. Even if we can only shave off one percentage point, refinancing is worth exploring, especially right now.
We have also taken steps to address some of the unique challenges of COVID-19, like social distancing. Many states and lenders are now allowing for eClosings and remote notarization. This makes the refinancing process possible during the pandemic. Whether or not these changes are here to stay remains unknown.
Right now, our chief concern is helping our clients get through this difficult time safely. Our team will work with you to figure out the best way to close your refinancing and maintain social distancing.
Is Refinancing Worth it Right Now?
Yes! With our team of experts, refinancing can be worth it, even with the volatile market right now. We will do everything in our power to ensure your refinancing is easy and straightforward!
We also believe people should “lend where they live.” Part of our mission includes serving our community with pride and passion. Using a local lender like The Domench Team ensures you experience unparalleled service, because as a part of our community, we care about our community. We want to see our friends and family thrive.
Contact Us Today!
If you are in need of lending services and live in the Vancouver, WA area, you’ve come to the right place! To learn more about your refinancing options give us a call today at 360-524-2587.