Question by Legallyblonde: I want to buy a new home and keep my old one. Should I refinance old home for better interest rate?
I am considering purchasing a new home in a few months, but would like to keep my existing home. I now qualify for a much lower interest rate on my existing mortgage and would like to know if refinancing my existing mortgage will hurt or hamper my qualifying for a mortgage loan when I purchase my new home.
Best answer:
Answer by Steve D
Well, refinancing at a lower rate will help if you stretch out the payments – the lower rate and longer time frame will lower the payments. However, you still have to qualify for the next mortgage based on income and debt ratio. It will come down to how much of your income is taken up by the existing mortgage and how much would be taken up by the new mortgage. Obviously, there is nowhere near enough information in your question to even begin to answer.
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Refinaince, but don’t increase your loan amount more than the refi fees. That should lower your payment, making it easier to qualify for another mortgage.
Just as a work of caution, be sure you check all of the cost involved in refinancing your existing home.
If you have an excellent credit rating, refinancing your existing home will not affect you in qualifying for another mortgage.
How long are you going to keep it? Many people only look at the interest rate, and disregard the fact that each refinance is going to cost you thousands of dollars. You may not have to pay that out of pocket, but you are going to pay it. You would have to get an incredible interest rate reduction to have that pencil in less than 5 years.
Next question, are you going to continue living in house #1? Some mortgages require that the home be owner occupied, and if you plan on moving into #2, you may find yourself running afoul of the lender on #1. They will call the note due and you will have 30 days to refinance, again.
I doubt a refi would effect your ability to purchase another home down the road.
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