Q: I am a 59-year old single woman who was recently laid off from a computer consulting job. This is the first time in over 30 years I am out of work but there is a good chance I will have something by early February of next year. My part of the industry should be a lot better then.
I have 6 years left on a 15-year mortgage at 5.75 percent. The balance is about $70,000. My condominium is worth about $145,000. Before I was unemployed, I didn’t seriously consider refinancing because I wanted to pay the loan off in the six years and didn’t want to commit to a new 15-year loan.
However as part of my employment transition I am considering a career change and will only earn half of my former salary.
Since I am unemployed right now would any mortgage company consider me for a refinance? If so, do I start with my current lender? Or should I shop for other deals?
I have no credit card debt and should have a very good credit rating. Will mortgage lenders even consider a refinance if I am without income at this point?
My goal is to save as much as I can so it can grow for retirement – which I hope is not too many years away. Currently I have money in retirement funds that I do not want to touch and enough liquid cash to handle the mortgage and monthly expenses for six months.
Please let me know you thoughts and any other considerations I should have. Thank you for all your efforts.
A: I’m sorry to tell you this, but without a job, you probably won’t be able to refinance your mortgage. Not with what’s going on in the current credit environment. There is no such thing as a “no doc” or “stated income” loan at the moment. Instead, mortgage lenders are verifying all data and information several times during the loan application process.
The good news is that in the grand scheme of things, your loan is at a decent rate, and you only have six years left until it is all paid off.
Also, you are basically paying down your loan rather quickly and most of that payment is for principal rather than interest.
If you were to refinance now, your loan payment might go down a bit, but you would continue to make payments on your loan for not only the six years you have left but for an additional nine years if you get another 15-year term on a loan or for another 24 years if you get a 30-year loan.
Even if you had a job, you’d have to think carefully about whether it would even pay for you to refinance.
You’ve already paid the lion’s share of interest and are now just paying down your loan balance. If you did refinance, you would have to be sure you could not only lower the interest rate and payments, but pay off the loan in the six years you have left on your mortgage.
You also have to consider that you might have to pay about two thousand dollars in closing costs to obtain a new loan and that’s money that you might want to keep in your pocket rather than paying for a new loan.
If you can’t cut down the length of the mortgage term and aren’t saving on the monthly payments, you shouldn’t refinance.
If I were you, I’d focus on your new job opportunities and not on refinancing.