The traditional rate-and-term refinance – where a borrower simply swaps an existing mortgage for a lower rate – is increasingly uncommon in the current market.
New approaches to the refinance question
Homeowners locked into sub-4% mortgages from 2020 and 2021 see little incentive to refinance purely for a better rate, she pointed out, when the 30-year fixed is sitting in the mid-to-upper 6% range.
Debt restructuring is filling that void. Clients with higher mortgage rates and significant high-interest credit card debt, for instance, can accept a slightly lower rate on a no-point loan, executing a cash-out to retire the credit card balances.
That can ensure several hundred dollars saved per month, not because of a dramatic drop in the mortgage rate but because the overall debt load was reorganized.
“We get a game plan together for them,” Eddy said. “Their credit is suffering. Their overall monthly output is extended beyond their limits. So we’re looking at the money that is theirs – tied up in their home, equity they’ve rightfully earned – and using that to pay off high-interest debts, get that monkey off their back, and let their credit heal.”