So, you want to refinance, but you also know that you want to sell your home in the near future. What should you do? Let’s take a look at a few of your options. A loan modification isn’t the same thing as a refinance. When you get a loan modification, your lender agrees to make changes to the terms of your loan and you can change your monthly payment, interest rate and term. In some rare cases, your lender may even agree to forgive a portion of what you owe in principal.Request A Loan Modification
Loan modifications are less expensive than refinancing. This makes them a great option if you’re having trouble making your payments before you sell your home and buy a smaller property. However, keep in mind that lenders have no obligation to honor your request or negotiate your loan terms.
Take A No-Closing-Cost Refinance
When you apply for a refinance, your lender might offer you a no-closing-cost refinance. This will roll your closing expenses into the principal of your loan. In exchange, you pay a slightly higher interest rate and don’t pay anything out of pocket at closing. For example, if you refinance a $100,000 loan, you might pay $2,000 in closing costs. You’d pay nothing at closing and take a loan with a $102,000 principal with a no-closing-cost refinance.
The name “no-closing-cost refinance” is misleading because you do, in fact, end up paying your closing costs later on in the loan’s term. However, if you’re selling your home soon, you might only pay a few extra dollars a month.
A no-closing-cost refinance can be a great option if you want to cash out your equity and make repairs before you sell. However, you should make sure that you make enough money on your home sale to cover your new mortgage principal. You’ll need to pay it off in cash if there’s a discrepancy.
Hold Off On Your Refinance
It typically makes financial sense to hold off on your refinance if you’re still deciding whether to sell your home now or wait. Do the math and see how long you’d need to live on your property to earn your money back from closing. It’s a good idea to skip refinancing if you don’t plan on living in your home long enough to earn back the expenses.
Do you want to do repairs or renovations on your property? If so, you may want to consider a home equity loan or HELOC instead of a refinance.Rocket Mortgage® is now offering The Home Equity Loan, which is available for primary and secondary homes.
