Your Holistic Agent

Here’s the first question asked in our New Year’s Cheesecake giveaway. I thought it was a darn good one, so I’m posting the question along w/my response, & Bank of America loan officer Michelle Bennett’s response as well. There were so many great questions asked- I will be answering them on an on-going basis, (in between working on deals for my faaaaaabulous clients, so please bear with!) but please keep sending them!

From the Lundblades:

How soon after we buy a home should we refinance. Some of these companies tack on all these charges and we are not sure it would even be wise to go for a lower interest rate with all the fees they tack on to the loan unless we plan to be here in this house for a long time. What do you think?
Also, would it be wise to buy another home in a few years and rent out the current one or would/do large mortgages hurt our credit?

My response:

Lundblades-this is a prime question for a mortgage banker, I’ll see if I can get 1 of my fave experts to sign on to answer it from their point of view! From my opinion however I can tell you that it depends on the amount of fees you might pay for re-financing & always it depends on how LONG you intend to hold the property. If you know these two numbers, you can come up w/a mathematical formula instantly to tell you whether it’s a good move or not. Ask your loan officer to give you a GOOD FAITH ESTIMATE outlining all costs & fees for the refi as a 1st step! Conventional wisdom says that it usually makes since to refi into a lower rate if you plan on staying in the home at least 5-7 yrs. Do you plan to own your home longer than the amount of time it would take to have the savings be absorbed by the cost of the refinance?
To your second question, as a person who believes wholeheartedly in r.e. investment I say YES it would be wise to buy another home & rent your own IF you don’t mind being a landlord & if you’re ready to build a r.e. portfolio & benefit from the rewards as well as accept the challenges (like vacancy, management of property, etc.). NO, having large mortgages or 2 or multiple mortgages should not (significantly) impact your credit (ESP. if your mortgages are in the form of a trust deed vs. an equity line of credit, potentially appearing like a maxed line of credit on a credit report)- in fact, if you have multiple lines of credit that you pay on TIME it will improve your score & improve your ability to acquire more credit. Many investors own multiple properties that are being simultaneously financed- this is a suggested goal to shoot for! Great question, as the guidelines for generating a credit score are kept a mystery to most people (by design?) so many people must wonder if having multiple mortgages has a negative effect! Glad to see, in my experience, it does not negatively impact the credit unless not paid as agreed.

Michelle, loan officer’s response:

It will all depend on your purpose for refinancing as to whether or not it will benefit you. You would want to do a comparison chart. Rates have been consistently low over the past year remaining at 40 year historic lows. If you have a higher rate in the 6’s or high 5’s it may make sense to refinance now even if you incur some costs because a majority of these fees can be used as a write off and it may save you a substantial amount of money over the next 10-15 years. Another factor to consider is how long you plan to remain the home? As for larger mortgages vs smaller mortgages, that does not affect your credit negatively as long as you remain current. Mortgage debt has an entirely different impact on your credit scoring than revolving debt such as credit cards, auto loans, etc. I would be happy to answer your questions in more detail at any time. You can email me at MichelleBennett914@gmail.com

Photo courtesy of www.besthousedesign.blogspot.com