4 Reasons to Refinance during a Recession

If you've been thinking about refinancing, you probably have your own unique reasons to refinance. However, during a recession, you are presented with more benefits than you would normally receive because a recession allows mortgage lenders to do things that they wouldn't ordinarily do. If you are in the market to refinance, here are a few reasons to do so during a recession.

1. Banks Are Desperate

During a recession, mortgage lenders start to get a little bit desperate for business. They might go much longer between loan applicants than they normally would during a regular economy. During a recession, everyone just kind of sits still. No one wants to make a mistake and fear paralyzes most people from doing anything. Therefore, mortgage brokers may start to advertise more to bring people in the door. Sometimes, the offers that they hand out are too good to pass up. You never know what they may do for you if you're willing to do business with them during the recession. 

2. Lower Interest Rates

One thing that happens during the recession is that the Fed will lower the prevailing interest rate in an effort to get the economy moving. This in turn, will allow the banks and mortgage lenders to lower their interest rate that is offered to you. You will be able to get out of your existing mortgage at a higher rate and lock in a lower fixed rate. The difference in monthly payments could be substantial for you because of the lower rate. If banks are desperate enough, they will lower the interest rates even further than normal in order to get you in the door.

3. Fewer Fees

Closing costs can make up a big sum of money when refinancing. In a traditional market, you will probably pay several thousand dollars just to get the loan that you need. Often, you can lump these in with the loan balance. However, when you do this, it sometimes negates the savings that you are getting from the cheaper interest rate. During a recession, the banks will likely waive some of these fees in order to produce more business. If they do not do this up front, you can sometimes negotiate your way out of many of the fees. If you let them know that there are many other banks out there competing for your business, you can sometimes get them to waive some of their fees.

4. Other Incentives

During a recession, you never know what banks will throw out there as an incentive to refinance with them. You might be able to get a free vacation, cash, a new TV or any other number of things. Although an incentive is not a reason for a refinance, it can help you save money in other areas.