When this blog post was first written in October 2021, mortgage interest rates were historically low. Money.com reported that the 30-year fixed mortgage rate was 3.503%. Forbes Advisor says that the current benchmark 30-year fixed rate mortgage rate is over twice the 2021 rate. The Bankrate figure as of this writing in September 2023, is 7.42%. The mortgage interest rate is near the highest level since December 2000.
Why would anyone want to refinance?
Here’s what’s interesting: When Interest rates were in the cellar, demand for new homes was high. People kept driving prices up because they were in such a hurry to buy at the lower mortgage rate. In those days, buying a new home was impossible unless you wanted to pay a premium. Now that interest rates are higher, you might ask if there’s any good reason to refinance your home right now.
Here’s the deal: Refinancing your home is not just about the availability of low-interest rates.
Even with high-interest rates, you might be able to lower yours if you happened to have a loan from December of 2000 above 7.42%.* It is also a great time to see if you can find a trust or conservatorship property that is maybe needs repair or perhaps has just the right number of bedrooms but it needs an extra bathroom to make it your just-right Goldilocks home. In that case, you could refinance your current home (maybe use a credit line) to buy a fixer-upper in a probate sale that you could make some decent money on.
- NOTE: These are average interest rates. People with better or worse credit will have a different rate.
Probate fixer uppers could be a good idea If your cousin Fred has experience with home additions and he has two brothers who are licensed electricians and plumbers. You (and your brothers and Fred) can sell the house to people who just can’t swing a big, expensive home but can be ever so happy in a cozy probate house.
What if you need a bigger home, but it’s better for you right now to add that bathroom and save a ton of money? Maybe you have to refinance to get the money for the extra bathroom, but it’s totally worth it because one of your kids is moving back home.
Or if you do need to upsize—but cannot afford a “regular” home at these higher-interest rates—you could refinance your home, take some money out, and use it for buying a lower-priced home from the inventory of trust, probate, and conservatorship homes right now. You never know when a great deal will pop into the marketplace.
So maybe you live outside of California and would love to move here. A less expensive probate home is the place to start for you. You might refinance your existing ANYWHERE U.S.A. home and buy a small probate home in the Golden State.
In the meantime, we will give you five good reasons to refinance now, three good reasons to wait, and one great company (The CREM Group) to have on your team as you approach the real estate market in these post-pandemic, unsettled times.
FIVE GOOD REASONS TO REFINANCE
- Interest rates are not at a historic low, but refinancing could be a way to stretch your payments over a longer period of time, freeing your cash for investing, going back to school, or starting a business at a rate much better than a bank loan.
- If your credit is better than it was when you bought the house, you may lower your rate, depending on when you started. Don’t forget that you will have closing costs on a new loan. It’s best to calculate all the new and old principal and Interest (P & I) payments with the closing costs rolled in and maybe a new tax rate. Make sure you use a good real estate brokerage (like The CREM Group) and a lender who will ask all the right questions.
- Refinancing is a good idea if you can lower your monthly payments and help pay off some other higher interest loans (like your car loan or credit card balance).
- If you have an adjustable-rate loan, you might want to snag a fixed-rate loan at the current rates to protect yourself from even higher rates.
- What if you are going to retire and you have to pay off the house sooner than the original plan? If the loan has a pre-payment penalty, it may be good to refinance to a loan with no pre-payment clause.
THREE GOOD REASONS NOT TO REFINANCE NOW
- You’re not sure if or how long you will be staying in your current home. Sit tight. Interest rates may go down.
- Your credit score is not so hot. (Click HERE for the U.S. Government website to learn about credit reports and scores.
- Note: Any mortgage interest rate will be higher if your credit score is low.
- Maybe it’s time to pay off some of the bills undermining your credit score.
IN OUR OPINION, REFINANCING MIGHT BE WORTH IT
It might be worth considering a re-fi because you will have to take a hard look at your goals, your credit score, and the real cost of having your children move back after college. Be sure before you start the process that you have:
- Done the analysis,
- Looked at your reasons, and
- Had someone help you “run the numbers.”
Here are more reasons: If you refinance, you can take money out of your home and consider buying a probate home or commercial property right now to start building your real estate empire!
The CREM Group deals in both residential and commercial trust, probate, and conservatorship properties. We are sure our clients and prospects would like to know if interest rates will go up, stay the same, or go down! SO DO WE!
The current rates are close to the highest in 23 years. It may not be the best time to refinance, but some circumstances may warrant refinancing. We don’t recommend making the decision all by yourself.
As long-time real estate agents for all kinds of properties in Los Angeles and Orange Counties, we have made sure we support our clients so they know the legal aspects of selling their probate, trust, and conservatorship homes in California. We also try to ensure that our readers are aware of many trends in real estate.
As always, contact us by email if you have any questions about real estate, probate real estate, conservatorship, or trust real estate properties, especially in Los Angeles and Orange Counties in California.
Mark Cianciulli, Esq. [email protected]
Disclaimer: This content is meant purely for educational purposes. It contains only general information about real estate and legal matters. It is NOT legal advice and should not be treated as such. We recommend consulting a legal or tax professional before acting on any material, opinion, or point of view described herein.