Should You Consider Refinancing?

Baltimore Real Estate Podcast with Seth and Alyce Dailey

Mortgage rates are still at historic lows. For many homeowners, it’s a great time to refinance. Refinancing allows you to pay off your current mortgage with a new mortgage at a lower rate. Refinancing means lower monthly payments and more money left in your pocket. But here’s something important that many people don’t know: Refinancing can affect your credit score negatively. You see, when you refinance, the new creditor will do a “hard inquiry” about your credit history. This inquiry can actually lower your credit score. Looking for new credit lines (like a new mortgage) equates with greater credit risk. How much will a hard inquiry actually lower your credit score? This depends on several factors. In some cases, a hard inquiry might not lower your credit score at all. However, if you’ve recently opened up multiple new credit lines (auto loans, credit cards, etc.), then a hard inquiry could decrease your credit score by up to five points. This is true if you only have a short credit history. And if you shop around for the best rate for more than 45 days, you will get multiple hard inquiries. Each of them will contribute to the total effect on your credit score. “A hard inquiry could decrease your score by five points automatically.” So what does this all mean for you? Unfortunately, there’s no simple answer. It’s going to be a part of the calculation you have to make for yourself, which will also include the refinancing fees, your own credit history, and how much you could be saving with a refinanced mortgage. If you’re thinking of refinancing, call us to get an idea of the equity you currently have in your home. We can put you in touch with several top Baltimore mortgage professionals who can help you through this decision. As always, if you have any questions about the Baltimore real estate market, give us a call or drop us an email. The Dailey Group is here to help you and those you care about move with confidence!