May 1, 2017
Despite rates being higher than they were during much of 2016, Orion’s brokers are still helping clients refinance their homes - and certainly purchase them! Here is some advice that they give their borrowers, especially in a rising rate environment.
Our brokers tell their borrowers not to wait too long. Even though rates aren’t expected to shoot through the roof this year, and they aren’t expected to exceed 5% in 2017, many experts think rates will likely stay on a steady, upward trajectory.
Borrowers will want to get their refinance application in as soon as possible. Borrowers are not obligated to lock in a rate when they apply. Orion’s brokers will tell them, “If you’re not ready to submit your application just yet, work on keeping your credit score up, have your financial documents ready to go, and save money for the upfront refinancing fees. Just remember that rates are rising slowly but steadily.”
Along with rates, home values are rising. Now might be a good opportunity for owners to tap into their home’s equity through a cash-out refinance. If they do so, proceed with caution. It’s risky to spend the proceeds from a cash-out refinance on things that don’t rebuild equity, like a car. Clients can also access a home’s increasing value through a home equity loan or home equity line of credit.
Refinancing into an adjustable-rate mortgage in a rising rate environment can make sense since these loans tend to come with lower initial interest rates than fixed mortgages. They’re especially useful if a borrower plans on staying in their home no longer than the fixed term of the loan.
Before a loan closes, a broker’s client will have the option to pay points on the mortgage, which is paying money upfront, to permanently lower the interest rate. If a borrower is concerned about the interest rate rising on the adjustable-rate mortgage or on a home equity line of credit, refinancing to a fixed-rate product can allow a client to lock in a new rate to make their monthly payments more predictable. And Orion’s brokers will tell borrowers with an existing HELOC that they should watch out for the recast period. Since rates are inclined to increase, if they currently have a HELOC, borrowers should look at options.