Most people would likely agree that managing mortgage payments during a mild economic recession is challenging. However, it can be even more arduous to be a homeowner when the economy takes a sharp downward spiral due to the spread of a contagious virus such as the coronavirus (COVID-19). According to the Center for Disease Control (CDC), there are now more than 1.9 million confirmed cases of COVID-19 in the United States, (approximately 27% of the number of cases worldwide) and the second wave of infections is expected to be extremely severe as well.
Fortunately, refinancing a home is an excellent option during difficult times such as these, as it can bring many benefits. Let’s look closely at what it’s like to refinance a home amid the COVID-19 pandemic.
Homeowners During COVID-19
The reality is that many U.S. homeowners at the moment are struggling to pay their mortgage because they have stopped earning income. As the federal and state governments began enforcing stay-at-home orders in March, a large number of “non-essential” businesses such as beauty salons, electronics stores, and sports arenas were forced to shutter. Since then, millions of workers across the country have become forced to file for unemployment.
What is even more concerning is the fact that many of these newly laid-off (or placed on temporary leave) homeowners work in industries that are believed to be “at-risk” of becoming severely disrupted and/or suffering significant losses due to the spread of COVID-19. According to a 2018 survey conducted by Harvard University’s Joint Center for Housing Studies, these at-risk full-time workers lived in 24.9 million households. Over half of these workers (59%) were homeowners and 43% had a mortgage. The survey also found that 22% of all homeowners with a mortgage rely on at least one household member who works in an industry now at risk due to COVID-19.
Opportunities Refinancing A Home Can Bring
Refinancing, which consists of taking out a new loan to replace your old mortgage, can yield many benefits, beginning with different options for monthly payment plans. This process can also help you repay your debts more quickly and easily or gain additional cash for special home projects. Jennifer Beeston, the vice president of mortgage lending at Guaranteed Rate Mortgage, the average refinance takes between 20 and 45 days. Here are three major opportunities refinancing your home can bring.
Lower Mortgage Rate
When you refinance your home, you should have the opportunity to either pay a lower interest rate or switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage (FRM). You may find that the latter type of mortgage is preferable to the former because it does not subject you to changing interest rates that vary in tandem with markets. According to Investopedia, one good rule of thumb to follow dictates that refinancing is considered a sound choice if you can lower your interest rate by 2% at a minimum. Nevertheless, certain lenders may assert that a 1% reduction in your interest rate should be enough for a home refinance. According to Mortgage News Daily, the average interest rate on a 30-year fixed-rate mortgage reached a record low of 3.04% on June 1.
Longer Timeline for Refinancing
Although technology is helping to significantly streamline and accelerate the refinancing process, you should still exercise caution when undertaking it. When you refinance your home, you can be allowed more time to pay off your mortgage if you adjust the terms. However, you can also pay off your mortgage sooner.
Potential For Great Amount Of Savings
You can save a substantial amount of money thanks to a home refinance. This process allows you to reduce your monthly payments and get rid of private mortgage insurance (PMI), which is a form of indemnity insurance that protects your lender in the event that you default on your mortgage. According to mortgage data and analytics firm Black Knight, almost 13 million homeowners can now save money by refinancing their mortgages and reducing their interest rates by 75 basis points or more.
A refinance also lets you consolidate your home equity line of credit (HELOC) and first mortgage into a single payment, or use your home equity for cash (if your property’s value has gradually increased). Given the high level of economic uncertainty that currently exists due to the COVID-19 pandemic, refinancing your home may be a sound decision.
Work With Mathis Title Company
Contact the experts at Mathis Title Company in Fairfax, Virginia to learn more about the benefits of mortgage refinancing during COVID-19. Robin Mathis is an attorney who has more than 35 years of experience in real estate settlement services, and Ann Andreatos is a licensed title agents who knows how to meticulously review documents.
Mathis Title Company’s team will provide you with personalized assistance and can help you with every step of the refinancing process, including close communication with your lender. You can even take advantage of our refinance special: for a limited time only, our pricing will be $400 in fees plus the title insurance. Call Mathis Title Company today at (703) 214-4020 or contact us online for more information about our services.
