CPA Bob Gauvreau explains when refinancing makes sense during the pandemic. Falling mortgage rates can lower your monthly payment or let you pay off the loan faster, but you'll need recent tax returns and a net worth statement. The catch: extending your loan means more interest paid overall.
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As unemployment rates continue to skyrocket across the US Canceled rent has become a rallying cry from coast to coast. A new survey reveals that millions of tenants say they cannot pay their rent. Housing activists are pushing for federal action to freeze all rent and mortgage payment during this COVID 19 crisis. But critics are arguing that withholding rent has dire consequences for landlords. And meanwhile, the average home price in May rose more than 4%. That's compared to a year ago. New data shows prices for cheaper homes grew faster than the rest of the market, rising nearly 7% from a year ago. The average mortgage rate fell from around 3.75% at the beginning of the year to under 3% in a matter of weeks after the pandemic struck the country. That sudden drop in mortgage rates leading many buyers to afford much more expensive homes while keeping the same monthly payments. And as mortgage rates drop, it means that there is a great opportunity to look at refinancing your home or your investment properties. Robert Govreau, CPA and founder of accounting firm Govreau and Associates, joins us now with more. Good to see you.
Good morning.
So what is the advantage of refinancing now? We know it's lower interest rates. What does that tangibly mean for one's life or one's finances?
Yeah, so there's many different benefits right now. But for sure, if we're looking at refinancing right now, either we're looking at lowering our monthly payment or we're looking at the ability to pay off our mortgage at a faster pace.
So what should you know about refinancing? I think a lot of people, obviously the saving in money is what you're going for. But there's certain things you need to know and have in place in order to do this correctly. Right.
For sure. So a few things that you have to have in place for any mortgage person to look at a refinance for you would be making sure your taxes are up to date. They like to look at tax statements, make sure that you're not behind on that so that you're not incurring, know a new payment plus any outstanding debt that's sitting there, looking at putting together a statement of net worth, showing how much value and equity that you have in your home. And then lastly, and the most important is really showing that you can justify any sort of possible increase in payment. If you were having to pull money out to pay off other debts, you need to be able to justify that you can incur that payment going forward.
Is refinancing for everyone. It looks good, but should everyone really kind of get in on this or are there some pitfalls you have to think about before jumping in?
Yeah, for sure. You know, we have to look at this as both a long term and a short term strategy for every individual. So if we're looking at taking on additional debt, that could mean extending out the terms of your mortgage or any other sort of debt financing. So we have to consider that, you know, if we were planning to be debt free in 10 years and now we're going to 20, that might be a really good short term strategy to reduce our cash outflows in our lives. But it may be penalizing you later on when you are going to be looking forward to being debt free. Other circumstances would be if we're looking at refinancing right now, if we're taking on more debt and we're increasing our monthly payment, with the way the economy is right now, we want to be certain that we're going to go forward.
All right. And tell me we're out of time, but those are great, great tips for us this morning. Where can people find you? Bob.
You can find me on social media at govro cpa G A U V R E A U C P A or on our website govrocpa.ca appreciate.
Your time this morning and for the tips. Have a great Saturday.
