Preparedness
THE GUIDE TO RE-FINANCING DURING COVID-19!
“The best and most beautiful things in the world cannot be seen or even touched~ they must be felt with the heart”~ Helen Keller
WHAT IS RE-FINANCE
Re-financing, refers to the process of revising and replacing the terms of an existing contract or agreement, such as a loan or a mortgage. When you decide to refinance a current or existing mortgage , you are really searching to make some favorable changes to the details of the mortgage such as the payment schedule, the interest rate, or any terms of the contract. You may want to review term, which is when the mortgage will be up for renewal. Or you may want to review the amortization period which is the length of time that the loan amount is amortized, or calculated I guess you could say. So a 10 year amortization period would be more expensive per month in premiums than say 25 -35 year amortization period. Why, because the loan will be paid off in full in that amortization period. So, the less time you have to pay it off is more in premiums. The more time, as 25 years would be less in premiums.
SUMMARY:
- Refinancing usually occurs when your existing loan or mortgage terms such as details get revised
- We always seem to refinance when the rates fall from our current contract
- You will need to remember that every time you borrow money, you will need to provide your credit rating, whether you are a person or a company. The re-evaluation of credit and employment or revenue will be required and the necessary approvals
- Refinancing is usually on mortgages, loans, car loans, and student loans.
How does Refinancing Work?
We generally seek refinancing on our mortgage when we want more favorable interest rates or length of the terms of the mortgage especially during any trying times such as COVID 19.
The 3 options that you can review with your Broker are:
- Lowering your interest rates to reduce the overall payments over the duration of the loan
- To revisit the duration of the term of the mortgage
- Or to switch from a fixed-rate mortgage or an Adjustable-rate mortgage
- Or re-visit when your credit rating has improved
- Or consolidate existing debts into one lower priced loan or combining it with the mortgage for an overall less monthly amount
HOW TO SAVE MONEY WITH THE RE-FINANCING CONCEPT DURING COVID 19
You can save quite a bit of money by re-structuring what payments you have. Sometimes you can look at what your current mortgage or contract looks like. What are the details of the mortgage? Don’t understand what the terms of the mortgage look like. Don’t understand what your policy looks like so you can move forward in either lowering your payments, or pay it off sooner, or just feeling too overwhelmed??
It’s important that you use a Mortgage Broker vs using a Bank or Trust company or Lender. Because believe it or not the Broker will do all the shopping for you and shop for the best solutions for you after having some conversations with you on your own situation. The Broker will also help you understand your contract with all 8 points below.
Refinancing to access equity – to help with your business costs or any other emergency costs or property opportunities, rental opportunities. It’s a tool that many people don’t think of but also a very very common reason to refinance.
Don’t know where to start? Take a look at the options where you can better understand what a few choices would be available for you:
UNDERSTANDING YOUR CONTRACT
- Interest rates
- Terms of the length of the contract
- Length of the amortization
- Pay interest only option
- Pay interest only + portion of balance owing – what they call your principal (so that it can be paid off in the amortization window
- Consolidating other debts into one loan, or line of credit or into your mortgage
- Over 55 options for reverse mortgages
- Also consider the pay-off option that your contract has so that you can pay it off anytime (some contracts have restrictions with only offering any options other than 20% off the mortgage annually)
LINE OF CREDIT
- Secured Line of Credit
- Unsecured Line of Credit
- Pay only interest only
- Pay interest plus principal (balance owing)
- You can have no balance for your Line of Credit and still have it there when needed either for renovations, balances of debts, retirement, traveling or business needs
- Great to have if you have any unexpected obstacles in your life that appear so that you have an easy and simple way of paying off something with an inexpensive way of borrowing
A few of the advantages that we have in 2020 Covid 19 ~
- Lower interest rates right now!! Which means you can benefit from the overall cost of the mortgage as well as the monthly premiums
- If you are employed right now with steady income and hours, whether employed or self-employed revenue, to look into re-financing or setting up a Line of credit for yourself in case of layoffs, or business slowdowns. You have to strike when the iron is hot! Look into when you have income not when you don’t. It is not an option when you don’t have income. So do this when times are good, so to speak!
Now what embraces all of these options are really 4 necessary components.
- A good to excellent credit rating
- Employment income of over 3 months or past probation
- Self Employed revenue for 2-3 years or more
- Down payment that coordinates with the purchase
- Show proof of employment
- The last is also required is the property approval as well- check with your Broker on what that looks like
STRATEGIES TO IMPROVE YOUR CREDIT SCORE
- Pay your bills early or ON TIME only
- Utility and Phone bills add points to your credit score when paid early
- Keep balances low when possible
- Only apply for NEW credit when needed, because every time you check your credit it takes a hit on your score – so try to eliminate the need when possible
- Try to not close unused credit cards because when you do this will also put a hit on your score
- Check your credit score at least once a year to be able to dispute any inaccuracies in your report
If you went through a bit of difficulty at some time with your credit score, remember to just follow those steps and you will build up your score quite quickly. You can also pay off all of your debts, and start over with a credit card. But use the card and pay it off quickly over time it will increase your score rapidly.
Now, our Podcast Show this week is an interview with Jenna Schofield from Jennajademortgages.com with Dominion Lending. You won’t want to miss the great tips and tricks that Jenna offered especially during these trying times! Enjoy!
JENNA SCHOFIELD, Mortgage Broker
778-889-9165
Jenna.jade@blancalending.com
FB : jennajademortgages
IG: jennajademortgages
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