Businesswise: Now may be an ideal time to refinance home mortgage

Question: We are considering refinancing our home. Do you have any tips?

A: If you have considered refinancing in the past, now may be an ideal time to get the ball rolling. While refinanced interest rates are not set in stone, the rates have been near record lows, making refinancing a smart decision for many homeowners.

If you are considering refinancing, consider these tips during the process:

• Make sure refinancing makes sense for you. You must qualify for a new mortgage loan to refinance your home, to repay your existing lender. For refinancing to be financially smart, you’ll likely need to reduce your interest rate by about 1% to offset the refinancing charges you may be assessed.  Also, if you plan on selling your home in the next few years, you should consider whether refinancing now and incurring the costs will pay off.
• Request a home appraisal, Mortgage lenders typically require a home appraisal prior to refinancing to make sure your home isn’t worth less than you intend to borrow. You usually need at least 10% equity in your home to refinance, so before you get too far into the process, make sure you have found a lender who will let you refinance you if have less equity.

• Shop for rates and lenders. Rates are bouncing up and down in response to numerous factors, such as the volume of applications, so search around to ensure you’re getting the lowest rate possible. When looking around, request information from mortgage brokers, online mortgage brokers and directly from financial institutions. Compare rates between lenders to ensure you are getting the best deal on your new loan. You can often find online comparison tools to help determine which lender is right for you.
• Check your credit report and score. Some lenders may be hesitant of loaning money to people who may be at risk of losing their job or an income cut due to the pandemic, so make sure your credit score is in good shape and that there aren’t errors in your credit report. If you are considering submitting refinancing applications with multiple lenders, be sure to submit your applications within a two-week span for minimum impact to your credit score.
• Consider locking in a mortgage rate. Every lender has its own policy regarding lock-in options, so make sure you know what your lender’s policy is prior to signing the paperwork. Locking in an interest rate is important because it will give you comfort knowing your rate is what you are budgeting for. Remember to ask about any fees associated with refinancing policy, since unexpected fees may affect your budget or the benefit of refinancing.
• Stay informed. As the coronavirus pandemic and the unknown certainty of when it will end continues, information regularly changes. Make sure you are staying up to date with the housing market and mortgage rates.

If you think refinancing your home mortgage may be helpful, consider consulting a reputable lender or mortgage broker to learn more. Refinancing is a commitment, but if it’s right for you, it may help reduce your monthly payment and pay off your loan in a shorter time. Many lenders have helpful websites to learn about refinancing, so be sure to do your research before you jump in and get all your questions answered so you can refinance with confidence.

Crystal Faulkner is a Cincinnati market leader with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmental entities and individuals. Tom Cooney is with Wealth Dimensions, an investment advisory firm. For additional information, call 513-768-6796 or visit online at mcmcpa.com. You can listen to Tom and Crystal daily on WMKV and WLHS on “BusinessWise,” a morning and afternoon radio show that profiles highly successful people, companies, organizations and issues throughout our region.