Should I Refinance My Home During the COVID-19 Pandemic?
There is a lot of uncertainty going on right now due to the coronavirus pandemic that’s sweeping our country.
Businesses and individuals are being powerfully impacted in ways you might expect – and in unexpected ways as well. The economy is shifting and fluctuating and the nationwide changes we are seeing are like nothing most of us have seen before in our lifetimes.
For a number of reasons, with widespread economic uncertainty often comes a drop in mortgage rates. We’ve seen this during past crises – and we’re seeing it now.
But the coronavirus pandemic is completely unprecedented. Though mortgage rates have lowered significantly, they are still fluctuating quite a bit. And because there is so much unknown about how and when the pandemic situation will end, they will likely continue to be volatile.
The pandemic has also impacted what makes a refinance work for each of the various mortgage programs, and has added new caveats in terms of what type of home buyer will qualify for and benefit from a refinance.
So, is now, in the midst of the COVID-19 pandemic, a good time to refinance your home?
There’s no simple, universal answer to this question – but we’ll take a closer look at the facts and answer some key questions so you can begin to understand whether or not now is a good time for you to initiate a home refinance.
Frequently Asked Questions About Refinancing During the COVID-19 Pandemic
Who Should Consider Refinancing Their Mortgages During the COVID-19 Situation?
All situations are unique and there are many factors to consider, so there is no one-size-fits-all answer to this question.
However, generally, it makes sense to consider refinancing your mortgage during the COVID-19 crisis if:
- Your current mortgage has a high interest rate
- You have a lot of equity in your home and want a lower mortgage term
- You are hoping to switch to a different type of mortgage (for example, from FHA to conventional)
- You are a Veteran and want to lower your rate using the VA IRRRL program to streamline refinance
- You have been making your payments on-time, especially your mortgage payments
- You are still employed full time at a business that is open and operating normal hours
Who Should NOT Consider Refinancing Their Mortgages During the COVID-19 Situation?
Again – all situations are different and many factors will impact this so it’s impossible to offer one specific answer that applies to everyone.
That being said, at this point it probably does NOT make sense to consider refinancing your mortgage during the COVID-19 pandemic if:
- You have a VERY low loan amount
- You have a poor credit score (recent mortgage late payments, recent late payments on your credit report)
- You are self-employed
- You are attempting to refinance a multi-family property
- You are currently furloughed or have lost your job
- You plan on moving in the next few years
Is Now Actually a Good Time To Refinance My Home?
Yes, now is a good time to refinance IF you meet the criteria above and:
- You have a high interest rate
- You have a lot of equity in your home and want a shorter mortgage term
- You’re hoping to change the type of mortgage you have
What Are The Indications That It Would Be Worth It For Me To Refinance?
Many people are wondering if there is a specific monthly savings or a percentage change in terms of mortgage rate that will indicate whether or not it’s worth it to refinance. In our current unprecedented situation, the indicators you might usually use to determine this are not quite as reliable.
That being said, if you think it might be a good idea to refinance based on the criteria mentioned above, it’s worth looking into.
We can review your situation and your options with you so you have a better understanding of whether or not a refinance will truly benefit you. We’ll discuss how long you plan to live in your current home, review your refinance options and potential savings, examine your breakeven point will be to recover any closing costs, and help you gauge whether or not it makes sense to move forward with a refinance based on your specific situation.
How Do I Know If I’m Eligible to Refinance?
There are a number of criteria that will make you eligible to refinance. Right now, credit score is a really big factor when it comes to whether or not you’re eligible to refinance your mortgage. You must have an excellent credit score.
You’ll also need to have equity in your home.
You must also have a job where you are considered a full time employee that can be verified by your employers – and you must still be employed at the time of closing.
What Are The Benefits of Refinancing Right Now?
The main benefits of refinancing remain the same as they are in “regular” times. Doing so gives you the opportunity to lower your term, lower your payment, and lower the interest you pay over the course of the mortgage term, if you stay in your current home.
Are There Any Potential Complications That I Could Run Into If I Choose to Refinance During the COVID-19 Pandemic?
You must be employed full time at a business that is open and working normal hours despite the pandemic leading up to and at the time of your closing. You’ll have to verify this yourself on a form, and the bank will call your employer the day before or the day of your closing to re-verify.
Unfortunately, because the pandemic has impacted many businesses, many people are finding themselves unemployed and furloughed, which is a major complication that will disqualify you from refinancing.
Additionally, it’s important to keep in mind that you’ll also have to adhere to social distancing guidelines throughout the process. This means that much of the process will likely be done over the phone, email or video conferencing instead of in person.
How Much Does It Cost to Refinance?
Each case is completely different, so the answer to this question will depend on your specific scenario and the type of mortgage you choose to refinance with.
We will work with you to help you understand the expenses associated with your refinance, and we will break out any costs that will be rolled into your new loan to help you avoid out of pocket costs.
How Do I Go About Refinancing During COVID-19 If I Want To Move Forward With Doing So?
If you think refinancing during COVID-19 is right for you, give us a call at (518) 782-1202 or reach out to us online to get the conversation started.
It’s a good idea to have the following on hand to start the discussion about refinancing:
- Your last mortgage statement
- Your school taxes
- Your property taxes
- Your homeowners insurance declaration page
- An idea of how much your home is worth
If we have this information available, once we have your income and credit score we’ll be able to let you know if a refinance makes sense for you.
Think Refinancing Your Home During COVID-19 Is a Good Option For You?
Refinancing certainly isn’t an option for everyone during the present situation, but if you meet the eligibility criteria and fall into the category of people it makes sense for based on the information we’ve provided above, then it’s an option worth exploring!
To get started, give us a call at 518-782-1202 or contact us online. Our team is still here for you despite the pandemic! We are adhering to social distancing guidelines, but we are still fully operational and we’d be happy to assist you.
Interested in learning more about refinancing? Check out our page about NY home refinancing here.