Smart Borrower Blog

Refinancing May Be A Good Option Right Now

Dec 26th, 2008 @ 8:25 PM by Alden Smith

Things may be in bad shape right now, but bankers say that now is actually a good time to consider refinancing your home.   You of course need good credit, and your home must not have depreciated in value so much that your mortgage is under water.  Banks are willing to go for loans on people who meet their criteria, and any movement now in this sluggish economy is a blessing.

Bankers warn that it is important that you check your credit scores, and also check closely the actual value of your home.  At this point in time, a good credit score is considered to be in the 700’s.  Bankers advise that if you have had a few late payments recently to get things to date and wait a few months before approaching any bank.  This makes sense even in the best of times.

Expect the bank to do a very thorough check on you and your credit.  Long gone are the days of “no document” loans that got us to where we are in the first place.  Bankers understandably are very nervous about their money these days.  They are now doing full background checks on everyone.   Plan on a lot of paperwork.  If you have heavy debt and are currently unemployed, don’t waste the banker’s time – you’ll get nowhere.

Another thing to consider is how long you plan on staying in the home.  If you are only going to be there for a few more years, it really isn’t worth it to you to refinance.  The money spent on refinancing will never be regained if you will only be there for a couple more years.  It makes little sense to refi unless you come out ahead overall.

If refinancing isn’t possible, there may be a chance that your banker will consider restructuring your loan to a 30 or 40 year mortgage.  Do this if your home has lost a lot of value.

Another thing to consider is a home equity loan.  You might find that you can do so at a very good rate.  This works well if you only have a short amount of time left on your mortgage before it is paid off.   Remember, though that only up to $100,000 is deductible on your taxes.

The credit market will probably not loosen up for a long period of time, possibly several years.  Be sure to do your due diligence when considering any financial move.

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