Should You Be Encouraging Your Mortgage Clients to Refinance?

There are many scenarios in which it may be advantageous for a homeowner to refinance his or her mortgage. As a loan officer, you will likely have an opportunity to generate revenue for yourself each time a client does so. However, should you be actively encouraging customers to renegotiate the terms of their current home loans?

When Does a Refinance Make Sense for a Homeowner?

A refinance may make sense if a borrower can obtain a lower rate on his or her loan. It may also make sense if an individual may benefit from cashing out equity in the property in an effort to consolidate debt or pad his or her emergency fund.

Is Your Client Eligible to Obtain a New Home Loan?

Generally speaking, a person needs a credit score of at least 620 to qualify to refinance a mortgage. This is generally true whether or not a borrower is looking to take equity out of a property. It may also be necessary to meet certain income, down payment and other requirements set forth by a lender. Finally, if those who want a home equity loan must have sufficient equity in their homes to do so. Generally speaking, lenders only work with those who have paid off at least 20% of their mortgages.

Home Equity Loans or Lines of Credit Have Low-Interest Rates

Home equity loans or lines of credit can be ideal for those who want to borrow large sums of money at a reasonable interest rate. Typically, a borrower will pay roughly the same rate on a first and second mortgage.

As a loan officer, it’s your job to help your clients obtain loans that fit their needs and budget. Therefore, it’s important to thoroughly evaluate a customer’s financial profile before recommending that this person take any action to renegotiate the terms of an existing mortgage.

Have questions?  Speak to an expert for more information.