Refinancing – Tips and Considerations
Have your customers considered refinancing to pay off vacation expenses or their children’s tuition? Has their financial situation recently changed? Maybe they’re looking to renovate their home or invest? Here are some alternative refinancing tips and considerations.
If your customer answers yes to any of the following, it might be time to think about refinancing:
- They want to pay off debts quicker and cheaper by consolidating them
- Their financial situation has changed
- They plan to renovate in the near future
- They want to use the equity in their home for a wealth creation strategy
If your customer has improved their credit score, it might be time to think about refinancing. Pull a copy of your customer’s credit report before beginning the refinancing process. You can work with your customer to clear up any mistakes and put their best foot forward in the qualification process. For customers who have mortgages with private lenders, beacon scores as low as 550 are eligible for lower-rate, alternative mortgages.
If your customer has an appetite to shorten their mortgage term, it might be time to think about refinancing. If your customer is in a higher-rate mortgage, you can help them maximize their savings by opting for a new loan with a shorter term. However, keep in mind that refinancing typically involves prepayment charges which will lower the savings, and vary from lender to lender. Prepayment charges should always be factored into the calculations of how much refinancing might save as should any fees.
If your customer requires more monthly income, it might be time to think about refinancing. Unfortunately, financial hardships can occur. Perhaps your BFS customer has less monthly income due to an economic downturn or their spouse lost their job. Alternatively, their debt load may have increased because kids are going to university. Whatever the reason, the need for increased monthly cash flow my exist. One option is to lengthen their amortization*. While doing this means they’ll be paying their mortgage longer, it can make the difference in meeting their immediate monthly cash needs. Ideally, this would be a temporary solution to handle short-term financial hardships backed with a plan for your customer to shorten the amortization upon renewal (to avoid prepayment charges and fees) once they’re back on their feet.
*Subject to credit approval.
In any case, your customer has options. Whatever their reason for refinancing, you can help them make a responsible and informed decision. To discuss any refinance deals you may have, contact your local BDM.