Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Shmuel has over two decades of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. Shmuel provides a uniquely holistic approach to comprehensive real estate and financial matters that goes well beyond any single transaction. Shmuel is an award-winning financier recognized for maximizing the short-term and long-term objectives of his client. As a contributing writer to many local and regional newspapers and publications, his insights have been featured in the media for many topics, including mortgages, personal finance, appraisals, and real estate trends.
By now, everyone is aware that interest rates are at historically low levels, the likes of which we might never see again in the United States. I often get calls from people on a Sunday or Monday morning, and they remark how they were with friends over Shabbos or the weekend, and the topic of interest rates came up. Naturally, they wanted to have a conversation to see if refinancing was an option. With rates this low, anyone with a current mortgage rate of 3.250% or higher is a candidate for a refinance.
There are “serial refinancers” who already know the variables and benchmarks and are ready to refinance when rates drop to their goal. I have many clients who have reached out to me with a “target rate,” and as soon as that rate is possible, they are ready to pull-the-trigger on a refinance. For those individuals, we already have a streamlined process in place to make sure that once the desired rate is attained, we can close the loan within 15 days.
Conversely, there is the opposite extreme of candidates who call and tell me why they shouldn’t refinance and why they haven’t yet refinanced. The reasons often range from concerns about qualifying for a mortgage, all the way through assuming that it doesn’t pay to refinance because there is no financial benefit. I often hear from a financially savvy homeowner who tells me that the break-even is too far in the future to make the economics worthwhile.
This week I spoke with several prospects, who, for different reasons, thought it didn’t pay to refinance because it is “unlikely” that they will be with their home or with their loan for more than 18-24 months. Again, each had a “life event” that “might” happen in the future that makes a refinance cost-prohibitive. While this doesn’t always happen, I was able to show each homeowner how they can benefit from a refinance immediately and realize a “net benefit” even before their first new mortgage payment.
Other candidates visibly saw the benefits of a refinance given their current situation, but did not consider it because of home improvements or conditions in their home, that they felt would prevent them from being eligible. In many of those cases, I was able to work with the homeowner, or with the appraisal companies, to make the mortgage sensible for the lender and the borrower without concern. Again, these are not commonplace occurrences, but it is impossible to know when a refinance truly isn’t feasible without proper thought and evaluation.
There are also many “old-timers” (not in age, but in archaic thinking) who measure the viability of a refinance only once the rate is a percentage point lower or more from what they currently have. This outdated philosophy was a good “rule of thumb” decades ago when the costs and hassle of getting a new mortgage were drastically worse. In many cases, and in many states, these deterrents are no longer a factor. I had a client move forward with a refinance with only a 25 basis point reduction but was able to save over six hundred dollars a month by consolidating one credit account.
At any rate, pun intended, if you have learned nothing from my writings other than – every mortgage and every candidate is should be treated independently – it has been worth writing these articles. I genuinely take the time with each candidate to evaluate all of their concerns, all of their objectives, and always incorporate that into the refinance consideration. Instead of looking for reasons not to refinance, I suggest you leave that up to the competent mortgage expert to evaluate and advise before you jump to any conclusions.
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