How to Educate Clients on Whether Now is the Right Time to Refinance, Sell, or Buy New

10.31.2024 | Category: Article

In today’s market many homeowners are questioning whether it’s a good time to refinance, sell their current home, or purchase a new one. With home loan rates fluctuating, it’s no surprise that homeowners who locked in high rates at the peak of the market may be looking at other financially savvy moves to save money in their budget.

As their trusted real estate agent, you’re in the perfect position to guide them through these options and help them make a decision that fits both the market and their personal situation.

Here are key tips you can give your clients as they assess whether refinancing makes sense—or if it might be time for a move.

Encourage Clients to Review Their Personal Finances
Start by encouraging your clients to take a close look at their personal finances. Refinancing may reduce monthly payments or shorten loan terms, but it’s important to ensure they’re financially ready for other costs, including closing costs.

Encourage your clients to go beyond the basics by reviewing recent bank statements, paystubs, and any additional income sources to get a full picture of their financial health. Understanding their cash flow will help them see how a refinance might affect their budget not just immediately, but also in the long term. If they’re considering a loan with a different term or structure—like switching from a 30-year to a 15-year mortgage—they’ll need to be prepared for potentially higher payments, even if it means paying off the loan faster.

Homeowners should also check for any recurring expenses or debts that could impact their ability to take on a new loan. If they’re carrying credit card balances or personal loans, consolidating those debts with a cash-out refinance might be a smart strategy, but they’ll need to make sure they don’t overextend themselves.

Reviewing their emergency savings is equally important; having enough set aside for unexpected expenses will provide peace of mind as they adjust to new monthly payments. This type of preparation will help clients feel more confident about refinancing and ensure it fits into their broader financial goals.

Advise Clients to Review Their Credit
A homeowner’s credit score and history are also important. A good credit score may unlock lower interest rates, making refinancing potentially more advantageous.

Advise your clients to pull a free credit report and look for any discrepancies or areas for improvement. If their score needs work, a few months of on-time payments or paying down balances can make a significant difference in the rate they’ll qualify for.

Encourage your clients to think about how their credit might change in the future, too. For example, paying off a car loan could improve their score, but taking on new debt—like a student loan—might temporarily lower it. These shifts could impact their ability to qualify for better terms if they plan to refinance later.

Help them consider whether it’s worth refinancing now or if waiting for a more favorable credit situation would better align with their long-term financial goals. The key is to ensure refinancing fits not only their current circumstances but also positions them for success down the road.

Recommend Clients Understand Current Mortgage Rates and Trends
Following current mortgage rates and trends are also essential to knowing if you’re ready to refinance. Explain to your clients how even a small shift in rates can impact monthly payments. If they’re currently locked into a higher rate, refinancing could offer meaningful savings.

It’s also important to walk your clients through the different mortgage options available, as the type of loan they choose will impact their rate and monthly payments. A 30-year fixed mortgage offers stability with predictable payments over the long term, but a 15-year loan often comes with lower interest rates, helping them pay off the loan faster—though with higher monthly payments.

For clients who don’t plan to stay in their home for many years, an adjustable-rate mortgage (ARM) might be a good fit, as it offers a lower initial rate that adjusts over time. Make sure they understand how each option aligns with their financial goals, lifestyle, and future plans so they can make the most informed decision.

Help Clients Assess Their Lifestyle Needs and Choices
Encourage your clients to think about their lifestyle and whether their current home still fits their needs. Refinancing is only worthwhile if they plan to stay put for several more years.

On the other hand, if they’re thinking about expanding their family, downsizing, or relocating, it might be a better time to consider selling and buying new. In that case, they’ll want to assess not only home prices but also how current mortgage rates could impact their purchasing power in a new location.

Ultimately, your role is to help your clients weigh both personal and market factors. Some may find that refinancing offers immediate financial relief, while others might discover that selling or holding off until the market shifts better align with their goals. Either way, you’ll strengthen your relationship by offering thoughtful, personalized advice that empowers them to make the best decision for their future.