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Refinancing With GOOD Credit - Is it worth it? Please help!

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Refinancing With GOOD Credit - Is it worth it? Please help!

Hi there,

 

My wife was in an accident October of 2018, and as a result, we needed another vehicle pretty quickly. Her scores at the time were in the low 600s, ranging from 610-630. She was approved for a loan with payments around $440 a month.

 

Fast forward to now, we've been aggressive about paying off our credit, and her credit has skyrocketed to 750-760. She continually gets offers to refinance, especially through apps like CreditKarma which talk about how much she could save a month.

 

We're definitely interested because she's likely to save a significant amount on her monthly payment which we'd love to put towards our mortgage savings.

 

Our concerns:

 

1. Will another hard inquiry hurt her score signicantly? She has 9, which 8 of them were through the auto dealer last October running her credit. He told us those inquiries would be looked at as only 1, though.

 

2. Our main goal is obtaining a mortgage and saving for that. We were thinking doing the refinance after we obtain the mortgage (looking to get it by the end of the year), but if we did it prior, we'd have more money to save. Any advice or suggestions?

 

Thanks in advance!

Message 1 of 10
9 REPLIES 9
Member

Re: Refinancing With GOOD Credit - Is it worth it? Please help!


I should add that her current auto loan is with SunTrust.

Message 2 of 10
Frequent Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

DO IT AFTER you have the keys of the home IN YOUR HAND do NOT touch your credit more than you have to before you get the home they say do NOT touch for 6 months before if possible and in October a lot of those should drop or be affecting you less since it will hit the 1 year mark as well Smiley Happy    Your house is WAY more important and refinancing before you do the home will affect your chances of getting the better deal/lower apr with the home Smiley Very Happy

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Message 3 of 10
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Senior Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

Yes, a good rule of thumb is that you dont' want to apply for any new credit at least 6 months before applyng for a mortgage, and you say you want to try for a mortgage by the end of the year so you're cutting it close. BUT mortgage underwriters look very closely at DTI, Debt to Income ratio, they want the mortgage payment plus all other payments to be under 40% of income. So, a lower car payment will help that.

 

You don't mention the current car loan interest rate, but with scores in the low 600s I assume it's at least 10%, and with current scores mid 700s she should be able to refi under 4%. If so, I say go for it.


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Message 4 of 10
Established Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

If it weren’t for the possible mortgage, I’d say it’s a no brainer, and refinance. What is her current loan rate? Refinancing means that the old loan will be paid off and a new one will be opened in its place, so the loan balance will go back up to 100% and it will be a new account (plus whatever inquiries). Obviously there are benefits too, such as saving money and lowering DTI, so this might be something to ask in the mortgage section. GL!


October 2019:

Stats:
Message 5 of 10
Valued Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

As others have suggested don't apply for any credit leading up to a mortgage, even if it reduces your debt to income ratio.  Once you have closed entirely and have keys in hand absolutely refinance.  You don't list the interest rate so its hard to say how much you would save but I believe its always worth doing because there are no closing costs like a mortgage refi.  Couple of words of caution, first don't add to the length of the current loan so for example if you have 48 months left on the current loan don't refinance for 60 months because you will likely cancel out any interest savings.  Also I always suggest credit unions for refinancing cars, it is very rare a bank will beat a credit union.  DCU and Penfed are two favorites but there are many great credit unions.

Message 6 of 10
Established Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!


@DaveInAZ wrote:

Yes, a good rule of thumb is that you dont' want to apply for any new credit at least 6 months before applyng for a mortgage, and you say you want to try for a mortgage by the end of the year so you're cutting it close. BUT mortgage underwriters look very closely at DTI, Debt to Income ratio, they want the mortgage payment plus all other payments to be under 40% of income. So, a lower car payment will help that.

 

You don't mention the current car loan interest rate, but with scores in the low 600s I assume it's at least 10%, and with current scores mid 700s she should be able to refi under 4%. If so, I say go for it.


+100

It depends on numbers that  we do not know.

It might be good to refinance.

 

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Message 7 of 10
Regular Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

As stated above, it may still be in your best interest to go ahead and refi, depending on your interest rate, etc. While it is suggested not to apply for anything for 6 months, it is because you don't want to appear to be "credit seeking." However, a letter of explanation (which will likely be required if you refi so close to the mortgage) could easily show why it was in your best financial interest to do so. If you move forward, I would definitely check out DCU. They have great auto rates.
Message 8 of 10
Valued Contributor

Re: Refinancing With GOOD Credit - Is it worth it? Please help!


@Kforce wrote:

@DaveInAZ wrote:

Yes, a good rule of thumb is that you dont' want to apply for any new credit at least 6 months before applyng for a mortgage, and you say you want to try for a mortgage by the end of the year so you're cutting it close. BUT mortgage underwriters look very closely at DTI, Debt to Income ratio, they want the mortgage payment plus all other payments to be under 40% of income. So, a lower car payment will help that.

 

You don't mention the current car loan interest rate, but with scores in the low 600s I assume it's at least 10%, and with current scores mid 700s she should be able to refi under 4%. If so, I say go for it.


+100

It depends on numbers that  we do not know.

It might be good to refinance.

 


Agree with this. I think there's a lot of skittishness about doing anything before closing on a mortgage, but unless you're a borderline approval to begin with, it's ultimately not going to make or break you. Doing something that lowers your DTI or debt is a good thing; running out and applying for $50k worth of credit to buy furniture for a house you don't have yet isn't. Just be smart about it and you'll be fine.

Message 9 of 10
Member

Re: Refinancing With GOOD Credit - Is it worth it? Please help!

Thank you all for the helpful replies.

 

I'd have to ask her the interest rates, but the above poster is probably close (10% +/-). It would definitely end out saving us signifcantly a month, so it may be worth the refi. Needless to say, this would be the only thing we do to our credit prior to applying for the mortgage.

 

Thanks again! Smiley Happy

Message 10 of 10
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