February 6, 2017
If you think nobody cares if you're dead or alive, try missing a couple of mortgage payments. All jokes aside, despite rates have moved up slightly, refinancing is still benefiting many borrowers that visit Orion’s brokers. And our brokers ask their clients, “Should you refinance?” There are five questions that current home owners need to answer. Why do you want to refinance? How long have you been in your property? And how long do you plan to stay? Can you qualify? Do you have the cash to cover the closing costs? Have you shopped for the best mortgage rate?
Orion’s brokers know that there are generally three reasons why people consider refinancing their mortgage. Current market interest rates are lower than your existing mortgage interest rate, you want to lower your monthly payment, you want to lock in a fixed interest rate. The savings from locking in a lower interest rate can be considerable. For example, a $200,000 mortgage at 5.5% would cost $43,995 more over 30 years than a 4.5% mortgage. Clearly that is savings worth chasing.
Our brokers will tell a client that if you refinance with another 30-year mortgage after 10 years, however, that puts you 40 years in debt instead of 30 which could end up costing you more in the long run, so often a 15-year refinancing would be a better option if you can afford the payments.
Regarding length of time in the house, frequent moves and refinancing activity can surprisingly make owning a home a worse economic decision than renting. The closing costs associated with refinancing the mortgage and the lack of amortization in the early years could add considerable costs.
In terms of qualifying for a new loan, Orion’s brokers will tell clients that usually the three most important parts of your application would be your credit score, LTV, and debt-to-income ratio. Most programs require a credit score above 660. If your score is lower, you should investigate an FHA mortgage. Do you have the cash to cover closing costs? Closing costs are not small, and will amount to thousands of dollars. Financing your closing costs could almost double the total cost with added interest.
Finally, make sure you have shopped for the best mortgage rate. There are rate variations. Our brokers know that Orion offers consistent products, pricing, and service, and that the combination is what is important.