Impact of Home Refinancing on Your Credit
Homeowners are always looking for ways to save money. With the cost of living going up every day, it can be hard to do so without sacrificing your future. Refinancing a home loan could help you get a lower interest rate and save you money on your monthly payments. At the same time, there are risks involved in refinancing, including the impact it may have on your credit, and you should consider these closely while making this decision.
At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. Not only do we offer a wide range of mortgage refinancing services, we also provide expertise and assistance with all the important factors to consider here. Let’s dive in.
Benefits of Refinancing a Home
Depending on your situation, there are numerous potential benefits to refinancing your home. These include both standard monetary benefits and those that speak to your personal well-being.
Standard benefits:
- Save money on your monthly payments.
- Get a lower interest rate – if the market allows for it.
Emotional benefits:
- Live the life you deserve!
- Enjoy peace of mind knowing that you will be able to afford your home for years to come.
How Refinancing Hurts Your Score
When you refinance your mortgage, the lender will create a new original (“hard”) credit pull on your report, which dings your score by a few points. Next, they’ll review your application and decide whether or not to approve you for the loan based on your credit history, income, assets, etc. If they don’t like what they see—for instance, if you have too much debt or are paying off a forbearance agreement with monthly payments that will interfere with repayment of this new loan—they may ask for additional documentation (like tax returns) or refuse to approve you outright.
In addition, refinancing means cancelling your initial mortgage, which may also lower your score. For this reason, it is best to be aware of the full financial situation before you begin.
Is Refinancing Worth It?
Refinancing is worth it if you find yourself in a difficult financial situation. You may be able to save money on your monthly payments or get a lower interest rate (depending on the market). However, when you refinance your home loan, your credit score will be reduced by a few points because the lender will create a new original hard pull from your credit report.
This will happen for any refinance that is not done through a mortgage company. It is advisable to do some research before you apply for the refinancing and see how this could affect your credit score before applying.
For more information on the impact refinancing may have on your credit score and whether this change is worthwhile for you, or to learn about any of our mortgage services or mortgage rates, speak to the staff at Altius Mortgage today.
