Last week I dared to mention the “R” word… refinance. This week, I want to talk about something I do for my clients when the market enters into a refinance period.
Setting up a target rate.
As mentioned last week, I tell people to begin having a conversation about refinancing when the rate they hear on the news is a half point lower than their current rate. What does the conversation look like? We’ll:
- Discuss the homeowner’s current rate, payment, balance compared to where rates are now.
- Get a general idea of how much longer the homeowner plans to remain in the home. Obviously, life can happen and people move unexpectedly, but knowing a general idea of how much longer they plan to remain helps confirm whether or not a refinance is worth it.
- Discuss potential savings. To me, when I can save $120… $150… or more per month, this is when a refinance begins to make more sense. Why? Saving $150 or more per month is noticeable in my monthly budget. Combine this with staying in the home for 4, 5, 6, 7 or more years, and it is a recipe for a refinance making sense.
- If the rate difference is large enough (say a current rate in the 8s and a new rate in the 5s), then a refinance would make sense even if a homeowner only planned to stay for as little as two years. The advantage of doing the refinance here is sometimes “staying two more years” can quickly turn into five years!
Perhaps our conversation ends with the homeowner wanting to refinance, yet the numbers do not make sense. No worries! I set up a target rate. I will have a list of clients and what rate works for their situation. When their target rate is available, I’ll contact them and have the conversation about refinancing again. Together we can decide if it is worth moving forward, or even waiting a little longer if the rate market feels like it will get even better.
There’s no pressure here!
Also, many clients go ahead and complete a loan application to have it ready to go. There is no credit pull/inquiry until the client is ready to move forward. When ready, then they provide me with written permission to pull credit, we finalize the loan app, lock the rate, and get going!
Setting a target rate is the best way to go about it because sometimes when rates take a dip, they don’t stay there for long. Rates can change every day, and sometimes more than once per day! Having a target rate combined with a loan application on hand allows for my clients to respond quickly to the rate market.
Own a home in Georgia? Have a high rate? Want a lower one? Then contact me today! We’ll discuss your current rate, balance, and payment. If the numbers make sense for a refinance now, maybe we move forward. Or perhaps create a target rate for when a refinance does make more sense!
