Mortgage rates are near record lows, and have been for quite some time. Many people still have interest rates from years ago that are well above the current rates and stand to save hundreds on their monthly payments. Why aren’t we all rejoicing in the streets? Unless you have stellar credit (at least a 720 credit score) and have at least twenty percent equity in your home, or are looking to buy a home, you are not getting an invitation to the party. Don’t feel so bad, many of us are on the outside longingly looking in with you.
It’s the perfect storm for unfortunate homeowners. Banks are still leery of lending money since the financial crisis. Equity has fallen as home prices are still in the tank. Appraisers are being overly conservative out of fear of new regulations put on the industry. All of this is akin to dangling a carrot in front of you as you try to catch it ‘” running on a treadmill. As a Realtor with many close colleagues in the mortgage industry, even I have been having trouble getting my 2007 mortgage refinanced to today’s lower rates. So much for connections.
So what is a homeowner to do? Well, unless you plan on selling and buying something else, you are going to have to make some sacrifices. Taking a hit on the mortgage rate will allow some imperfections in one’s credit score or equity stake. The amount of the hit depends on how imperfect. It can possibly be only an eighth or quarter of a point. At the rates available at the time of this article, that is still lower than many people were getting when I purchased my home in 2007. It could also be time to renovate. I’m not talking about that dated kitchen. I’m talking about your credit. You may want to put some time and effort in to doing what it takes to raise your credit score . If you have available savings that you feel you can part with, and you’re not far from the equity line, you can also pay down the mortgage to get your equity stake over twenty percent. Some banks are looking for thirty percent of course, so you may have to rule those out.
For some, these options may not be so much of a sacrifice. For others, they are still impossibilities. Many of us are in the ballpark, but we wait out of fear of kicking ourselves later for accepting anything but the lowest rate available. Refinancing more than once means paying multiple closing costs so you are going to want to make sure that whatever choice you make, it’s one you can live with for a while ‘” that’s if you have any choices at all. Depending on your situation, some actual renovating may be in order. Minor updates in curb appeal such as simple landscaping or paint could help give your home value a slight boost. Kitchens and bathrooms sell homes, but they tend to cost more than the value boost they give, so stay away unless you are a competent do-it-yourselfer .
In the end these things may not be enough. I’ll be painting and doing some landscaping myself. We also plan on updating our entrance way which has long needed some TLC. Even if it doesn’t give us the value boost we need to refinance, at least it will leave us feeling better about our home. That resolution may not work for all home owners out there, but it’s an alternative to calling Realtors and putting a sign out front.
Brian D Inocencio is a licensed Realtor in Rhode Island.