REAL ESTATE MATTERS For release 11/09/13
BC-glink 11/09 TMS Original
REAL ESTATE MATTERS For release 11/09/13
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Refinancing vacation home can be tricky without lots of equity
Tribune Content Agency
By Ilyce Glink and Samuel J. Tamkin
Q: We have a vacation home in the mountains. We have a 30-year mortgage with a 7 percent interest rate. Any ideas on whether it is a good time to try to get a better rate? If so, what is a good way to go about it?
A: The past couple of years have been the best time for finding low interest rates on home mortgages, and you should be actively looking for a lender to refinance your loan. The issue for you isn't whether prevailing rates can beat a 7 percent loan, but rather if you have enough equity for a lender to grant you a new loan. You also need to know whether you can find a lender willing to give you a loan on a vacation property at all.
Generally, it's easier to refinance a vacation home the greater the equity you have in that property. If you have quite a bit of equity -- perhaps at least 30 percent -- you may have greater luck finding a lender willing to refinance your loan. If the home's value is less than your loan amount, you're in trouble and may have to keep your current loan for some time, unless you pay down the amount you owe the lender. You may also find some relief for refinancing through the HARP program. Get details at MakingHomeAffordable.gov.
To find out whether your home can be refinanced conventionally, start by talking to various lenders located near your vacation home. You should try mortgage bankers and mortgage brokers. You should ask friends and relatives to give you the names of good referrals you can use. You can also ask neighbors at the vacation property if they have had good experiences recently refinancing with a lender and check those lenders out.
We'd prefer you do your mortgage shopping without giving lenders your Social Security number. Your questions should relate to their ability and willingness to give loans to vacation property homeowners. You will need to tell them about your current loan, the value of your vacation home and maybe even some of your other financial information. But we don't want you giving them your Social Security number until you have a better idea of whether they can help you and whether they have loan products that you would want.
When you shop around, lenders may want to see your credit history and credit score, but each time a lender pulls a copy of your credit history, it can be affected negatively. If you pull your credit history with a bunch of lenders within a month, your credit score may not be affected. However, if you do that over a period of several months, each pull on your credit history will ding your credit score.
You want to protect your credit history and limit the number of times creditors pull a copy of your credit score. Frequently, you'll get offers for store credit cards in exchange for an upfront discount at the store. That discount had better be a good one, because they will pull a copy of your credit score, causing your credit score to drop a bit. The credit bureaus' formula for computing your credit score generally also looks at the number of times different creditors pull a copy of your credit history. Therefore, if you frequently try to obtain store credit cards, you may find it harder and harder to get the better credit cards with the lower interest rates.
The higher your credit score, the better the interest rate and terms you'll get on a loan. For these reasons, as you shop around and investigate, you don't want a copy of your credit history and score pulled until you're pretty sure you are ready to move forward with a particular lender.
(Ilyce Glink is the creator of an 18-part webinar and ebook series called "The Intentional Investor: How to be wildly successful in real estate," as well as the author of many books on real estate. She also hosts the "Real Estate Minute," on her YouTube.com/expertrealestatetips channel. If you have questions, you can call her radio show toll-free (800-972-8255) any Sunday, from 11a-1p EST. Contact Ilyce and Sam through her website, www.thinkglink.com.)
(c) 2013 ILYCE R. GLINK AND SAMUEL J. TAMKIN. DISTRIBUTED BY TRIBUNE CONTENT AGENCY, LLC.