Should I Sell or Refinance My home?
Updated: Mar 25, 2021
Are you interested in refinancing your mortgage, but hesitant to do so because you're thinking of selling your home at some point? Refinancing could still make sense. Cliff Potts, Broker at industry-leading Berkshire Hathaway Homeservices Advantage Realty in Payson, Arizona, says, "homeowners have a lot of options on the table right now that could really benefit their financial state." "If you have been upside down in your mortgage, this could be an excellent time to get right side up," says Potts. He also says, "now could be a great time to sell your current home and find that “just right” forever home. that has now become more affordable than ever, due to declining interest rates." Whether you are considering selling your home or refinancing, here are some things you should strongly consider.
Your Financial Circumstances Could Change
Let's say you plan to sell your house in five to seven years. No matter how well you prepare for the future financially, things happen. Job loss, illness, death — life inevitably gets in the way of your financial plans. Focus on the here and now, as you consider whether or not to financially justify refinancing your mortgage. The longer the horizon of selling the home, the more chances life has of getting in the way. If refinancing can save you money in the meantime, it may just make sense.
Because financial circumstances can change over time, for better or worse, it can be a good idea to calculate how affordable your house really is for you. There are several online calculators that can help you determine just how much your home is costing you. An example would be How Much House Can I Afford? – Home Affordability Calculator, from www.Smart Assett.com
You Could Take Advantage of Lower Interest Rates
30-year mortgage rates have recently fallen to historic lows. The new outlook for mortgage rates shows that this may be the time to act. Picture this, if you don't sell the property or if there is a market correction — and you do not refinance for whatever reason — is your current loan rate and payment something that you can afford to carry for the long haul? If you could save money or better your financial position, it is probably worth investigating. Rates are even better on jumbo mortgage loans, as more investors are pouring into this particular market niche. So if you have a big mortgage on your home, you may want to consider refinancing.
How Quickly Will You Begin Saving Money?
Potts says, "No one should refinance unless the time frame it takes to recapture the closing costs on a refinance is sooner than the time in which they plan to sell the home." The most common form of determining how quickly you can recoup your money when refinancing is performing a "cash-on-cash" calculation. For example, if your closing costs are $2,800, and you're saving a proposed $300 per month on a refinance, that's a nine-month recapture. Fees divided by benefit equals recapture.
If you can benefit by refinancing by payment reduction, by cashing in on equity, or by interest savings or any combination of these benefits, remortgaging your home very well could make sense. Consider the following scenario: If you can recapture the costs of the refinance in under two years, and you don't plan to sell for five years, you're three years ahead, and the rewards are yours, no matter what the future holds. Ultimately, weighing out the pros and cons of a possible refinance in conjunction with selling the home is a decision for you to make. A good mortgage professional should be able to suggest mortgage options in alignment with your financial goals and objectives, which can help you make the most prudent decision.
What if the economy is forcing you to sell your home, and Refinance is not an option? When is the best time to sell your house? Timing can make a big difference in terms of selling your home quickly and for the most cash.
There's no crystal ball for reading the housing market, but there are ways to stack the deck in your favor. Here are four things to consider before putting your house on the market.
1. Keep an eye on the local economy
The strength of the U.S. housing market as a whole certainly plays a role in home prices. According to a realtor.com analysis of annual price growth rates, a home's value generally increases 3% to 4% a year when the economy is strong, driven by inflation and natural population growth. You'll want to assess your local economy's conditions when figuring out when to list your home. One benchmark you can use is the S&P CoreLogic Case-Shiller National Home Price Index, which monitors single-family home sales in 20 major U.S. cities. Another valuable resource is the Metropolitan Median Area Prices and Affordability tracker from the National Association of Realtors®. In general, Payson’s housing market follows national trends and more closely follows the Phoenix housing market. Keeping in mind that all real estate is local. Zillow.com reports that Payson’s real estate values have risen by 4.3% in the last 12 months. Potts says, The best market analysis for your property, here in Rim Country, can be provided to you, at no cost, by our trusted team of local real estate professionals.
2. Mortgage rates matter, too
Generally, more people buy homes when mortgage rates drop, historic data shows. As a result, prospective sellers should be monitoring the mortgage market, says Jack Guttentag, author of "The Mortgage Encyclopedia."
3. Wait until your home's in good shape
Potts says, "To fetch top dollar for your home, the property must show well. This may require you to take the time to make repairs to your house. One of the more costly mistakes a person can make is rushing to get their home on the market and not making needed repairs." If you live in a nicer area, you need to "Keep up with the Jones." Keeping up with your neighbors is also important. If all the houses on your block are beautifully furnished and landscaped, then it's likely worth it to spend the extra cash to make sure you are competitive.
4. Your personal preparedness is a priority, too
Yet no amount of timing should eclipse what time is right for you—personally, professionally, and otherwise. Are you ready to move on? Many homeowners sell when they change jobs or when their children switch schools, or when the kids fly the coop and the parents are ready to downsize. So, take stock of your own situation when deciding whether to put your house on the market now or wait.
The bottom line when considering either refinancing or selling, it really comes down to what your gut is telling you. Pott's says, "usually, your gut will tell you what is right for you and your personal situation." But he does say something that can really help is finding the right Realtor or Agent that understands your area and is an excellent negotiator. Having someone that is in your corner and is going to fight for the best possible deal is priceless.