Paul's Bellingham Blog

My thoughts on Bellingham, the Real Estate market, and more

5 Things You Need to Know if You are Considering Refinancing Your Home

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I am getting asked by a lot of my clients in and around Bellingham whether now is a good time to refinance, with interest rates down near 3%!  It is indeed a great time to consider refinancing, but here is 5 things you need to know before looking into a refinance.

1) You can probably refinance, even if you are underwater. If you are underwater on your home loan, or you don’t have a lot of equity, the HAFA 2.0 is something you can look into with a loan officer, or your loan provider direct. Most people can refinance without any equity through this program (assuming you have a solid job and good credit).

2) Check with two loan officers. It’s always best to check with at least two loan officers on rates, fees and options. I recommend picking one loan officer (ask your Realtor or contact me) for a good referral. Then you can also call your servicing lender direct and see what they offer you.

3) Get a free assessment of your home value from a Realtor before paying for an appraisal. Even if you are not underwater and have equity, you may not have the 20% equity you think you have. An easy way to get an idea of what your home is worth first, is getting a  free Comparable Market Analysis from your Realtor. Or again, you contact me if you live in Whatcom or Skagit County and I’d be happy to provide this free service! By the way, Zillow is wrong more often then it’s right. So getting an actual person to assess the value is always the way to go.

4) If you are considering selling in the next 2 years, a refinance may not make sense. The cost of refinancing on the average $200,000 loan can be upwards of $5,000 after all costs. That usually gets added on top of your loan principal, which eats into your equity. With most refinances, it can take 1 or 2 years to NET any savings on the refinance. If you are considering selling in the next 2 years, be sure to crunch the numbers  with your loan officer and Realtor before moving forward. If you are not sure if you are selling in the next 2 years, one option is you can request a higher interest rate (perhaps 3.75 instead of 3.25%) that builds in the costs of the loan, therefore NOT raising your principal.

5) If you get turned down on your refinance, and can’t afford your payment anymore, there is other options. HAFA 2.0, as mentioned earlier, may be an option even if you are underwater. HAFA 2.0 also has an option to lower your principal. You can also talk to a Realtor (including me) about considering a short sale.

A short sale and the HAFA 2.0  principal reduction refinance option will effect your credit, but it can help you stay in control of your situation, which can often times eliminate all of the stress that can occur in this situation..These options are often times better then letting your home go in to foreclosure.

Any questions, please contact me at 360-920-5901, or paulbalzotti@johnlscott.com.

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