The current situation surrounding COVID-19 has led to a lot of uncertainty, and the real estate market is no exception. With workplaces slowing down and no idea when the pandemic will end, it may be a good time to refinance your home. Here are some things to keep in mind.
1 Take advantage of low rates.
Interest rates are at the lowest they’ve been in years, and its unlikely to be this low again. Refinancing can help to take advantage of the market to pay less, and earn more in the future.
2. Pay off any bad debts you have.
Do you have a credit card that has a negative balance, or a car payment that just won’t go away? Those are what we call bad debts, as they depreciate in value while increasing in cost. By refinancing, you can pay off those outstanding debts before any more costs are accrued, and put your focus into a debt that appreciates in value.
3. Save for a rainy day
The future can be unpredictable and it’s important to prepare for it. Using your financing to create an emergency fund can help in case of any major repairs or unexpected payments that may arise with your property.
4. Re-invest for higher returns:
If you have extra cash or Line of Credit, that can help you take advantage of the market conditions and invest in other properties or Stock Market options. If the shut down extends for a longer period, then there are high chances for the property prices to go down which will reduce the value of your property.
While these benefits can certainly make refinancing seem like a no brainer, there are risks associated with it as well. The property may not make enough cash flow to offset the costs of the mortgage, tenants may not be able to pay rent during the pandemic, and the extra interest may not be ideal for every buyer. That said, if you’re in an advantageous position with your properties and have bad debts or low savings, then refinancing may be the right move.