Talking Refinance with Joe Uzee



     Joe Uzee, Vice President of Mortgage Lending at Gulf Coast Bank & Trust Company, gives his insight into refinancing. Read on to learn more straight from the source!


Is a Refinance Right for Me?

There are many events headlining news today. One headline is the low mortgage rates! It is true that mortgage rates have been decreasing throughout this year. We started the year with 30 year fixed rates around 4.625% and now 30 year fixed rates are below 4%. There are many factors for this decrease and some analysts feel that rates could dip a bit further for the rest of this year and even into 2020. The purpose of this information is not to go into the reasons for the decrease in rates, but rather, what does it mean for the borrower?

For current homebuyers the effect of lower rates is simple. Homebuyers can qualify for a higher mortgage amount and therefore a larger or more expensive house than they originally thought. If qualifying for a more expensive house is not the main priority, then the homebuyer(s) will see a lower house note because of lower rates. For the homebuyer the window of decision regarding their mortgage is relatively short. Most homebuyers enter into a purchase agreement and are closing within 30-45 days. Typically the homebuyer has already been pre-qualified or pre-approved, and the lender has already been chosen when the purchase agreement is signed. Discuss locking your rate with your loan officer based on your closing date. Be happy that you are purchasing during a time when rates are low!

For current homeowners considering a refinance the effect of lower rates could potentially have a huge savings, but the decision is not as simple as the mortgage for purchasing a home. When you buy a home you need the mortgage immediately; when you are considering a refinance you don’t have to refinance. If a refinance can help, then a current homeowner should not miss the current opportunity. There are numerous reasons to refinance. Some common examples are to get a lower rate and lower the payment, to shorten the term and pay off the mortgage earlier, to take cash out, and to change product and eliminate mortgage insurance. There are many other reasons to refinance and some of those additional benefits are noticed when the loan officer analyzes the complete picture with their client.

I have been in the business for over 25 years. The old rule of thumb was to only refinance if your rate would drop by at least 1.5%-2%. That is not necessarily the case anymore since we are in a different lending environment. The combination of getting a slightly lower rate and being able to remove, reduce, or finance in mortgage insurance could be a huge savings. If you look at 30 year fixed rates over the last 7 years, you will see that rates were consistently below 4.5%. During 2015 and 2016 there were some good dips into the mid 3% range, and in 2012 and 2013, there were some dips into lower 3% range. If you were a homebuyer during these times, then your rate is probably set and there would be no reason to consider a refinance unless you still have mortgage insurance. You could possibly get mortgage insurance removed without a full refinance; consult with your current mortgage company. You may have plenty of equity in your home and you may want to consider taking some additional cash out while rates are low.

You may already have a great rate, but being able to borrow additional cash at a low rate could be a consideration.

In 2018, just last year, rates hit the 5% range during the last quarter. If you purchased during this time, then you would definitely want to have a lender analyze your situation to see if there are benefits. Obtaining a lower rate and removing mortgage insurance, if you have it, could be very beneficial. My advice is to always go back to your local lender, if you used one, or find a local lender. Many refinances are contingent on appraised values. Your local lender will have the resources to do a little research on that before you spend money on an appraisal. Plus, it is always better to be able to meet with a lender face to face. What else should you consider?

It really comes down to the cost vs. the benefit. Do not be misled; all refinances contain closing costs. The lender can roll these costs into the new mortgage, or cover them with a lender credit, but you have to consider these costs. Have your lender explain this to you and show you what your savings are in relation to the costs. Determine the break-even point and that should be a good guide in determining whether a refinance is right for you. Most clients break-even in 24 -36 months. Some break-even points are less than 18 months or even a year. If you see yourself still owning this home with the refinanced mortgage for a period beyond this break-even point, then a refinance could be right for you.

Finally, do not try to time a refinance. I am letting you know that rates have gone down and there is an opportunity to refinance now. Reach out to me or your local lender and complete the analysis; if it makes sense then proceed. I did mention earlier that rates could dip further, based on what some analysts forecast, but that is not set in stone. The Fed is expected to reduce rates again, but this has already been priced into the current market. If they reduce rates then we should stay in the current range. If they do not reduce rates, then rates could worsen. There is a saying, “Pigs get fat and hogs get slaughtered.” I always say be a pig and not the hog!!!


You can connect with Joe to learn more about your refinancing goals at: