Doesn’t Affect Credit Score
If you are thinking about refinancing to get a lower interest rate, it will not affect your credit score. You can apply for the refinance loan, and if approved, then this will show up on your credit report as one inquiry which is considered to be good news because multiple inquiries made within a small time frame, like 30 days or less, could impact your FICO score negatively. So make sure that when refinancing, you allow at least 60 to 90 days between all of your mortgage applications so that no negative effects come into play.
Downsides of Refinancing
It Can Be A Long Process
Refinancing will take time, so you need to be patient. You have to wait for rates to rise and then go back down again, which can sometimes happen very quickly, but other times it takes a few months or even years! So if your home needs repairs that cannot wait around then refinancing might not be the right choice because of how long it could take, and this is why many homeowners choose not to refinance.
It Costs Money
There are fees involved with applying, too, such as legal expenses, appraisal charges, and other things like title insurance, depending on what state you live in. This all comes out of pocket before closing costs at the end when everything has been approved by underwriters until finally receiving a mortgage check from your refinance lender. So it can be expensive to apply for refinancing, and this is why some people choose not to go through the trouble of having an appraisal done, meeting with their loan officer, or getting title insurance.
Savings May Be Minimal Depending On Your Current Rates
While refinancing right now while rates are low is a good idea, some borrowers may not see as many savings compared to previous refinance loans. This can be because the borrower already has great interest rates and they were first-time homebuyers or purchased their homes very cheaply, which means that there was less money owed on the mortgage balance in the first place.
No Guarantee That You Will Get A Refi Loan
There are no guarantees that you will get approved because each application is different, and so many things come into play, such as credit score, which determines interest rates, property valuation if there has been any home value depreciation since purchase, and other pre-approval factors like debt ratio.
The Bottom Line
If you are looking to refinance your mortgage, now is the time. While refinancing may take a bit of patience and upfront investment, there are tremendous benefits for homeowners. It’s always a good idea to take advantage of low mortgage rates while you can, but it might not be the right choice for everyone. Analyze your current situation and try to make the best choice for you!
