Facts About Mortgage Refinancing During COVID-19

Nobody knows how long COVID-19 will continue to affect our lives and the economy. With this much uncertainty going on, it is expected that mortgage rates will be volatile. Many people wonder whether this is a good time to refinance their homes. If you are one of them, you would want to evaluate whether refinancing is the right option early so that you are prepared to make the decision when the time is right. Here are some facts about mortgage refinancing during COVID-19 to help in your decision.

What is Refinancing?

Mortgage refinancing is the process of taking out a new loan to pay off the original mortgage loan. Homeowners choose to do so when they see an opportunity to benefit from refinancing. Some benefits include being able to take advantage of lower market interest rates, reducing monthly payments with a longer repayment term, or cashing out a portion of equity.

How Long are You Keeping Your Home?

To judge whether mortgage refinancing makes sense for you, it is important to know how long you are planning to keep the place. Discuss your options with a loan officer to understand how long it would take for the refinancing cost to be recovered. Some factors to consider are how much the monthly mortgage payment would decrease and the projected closing costs. From there, you can determine how long it would take to break even. If you are planning to sell the home before that time, refinancing would not make sense.

Tapping into Home Equity to Pay Bills

If a homeowner takes out a new home loan that is higher than the current mortgage balance, they can cash out the difference, which is the home equity investment. For homeowners who have a reduction in income due to COVID-19 and need the extra cash to make ends meet, this form of refinancing can be way for them to pay bills.

Refinancing is Possible with Social Distancing

Although the spread of COVID-19 has resulted in social distancing, it is still possible to sign the documents for refinancing in person. In addition, many states now allow virtual signing.

Impact on Credit Score

Applying for refinancing will affect one’s credit score when lenders perform an inquiry on their credit to determine whether they are a risky borrower. This is regardless of whether the refinancing goes through. However, this impact is only temporary. If the homeowner continues to make prudent payments, the credit score will improve to where it was before.

Refinancing Your Home with Stockton Mortgage

Are you thinking about refinancing your home? Stockton Mortgage will help you evaluate your unique situation and recommend options that make the most sense for you. With a variety of loan programs available, you can find the best fit. Contact us today to let us know how we can help you.