Can You Refinance While Listing Your House?

Written by Posted On Thursday, 30 May 2024 00:00
Can You Refinance While Listing Your House? Image by xb100 on Freepik

As you’ve certainly noticed, mortgage rates have drifted downward over the past year or so. For several reasons, maybe a slower economy or the Fed has lowered a key interest rate. Whatever the reason, lower rates can trigger someone to make a decision to refinance. And it makes perfect sense. 

If someone can refinance out of a higher rate into a lower rate, the payments will fall. You want to speak with your loan officer about whether or not a refinance is right for you, but in general as long as you own the property longer than it takes to recover the associated closing costs, it might be right for you. Or maybe you want to shorten the term of your loan to save on interest.  But again, let your loan officer tell you. 

Someone may also be deciding whether or not to refinance or would it be better to just take advantage of the local real estate market and sell the home? Either option is no small decision. Maybe you’re thinking of listing the home to see if you can get a good offer while also refinancing to a lower rate just in case a solid offer doesn’t come in. If you do decide to list while at the same time applying for a refinance, maybe the decision has already been made...by your lender.

Why is that? Lenders will shy away from starting a new loan for someone if it’s possible the property will be soon sold. Lenders really don’t start making a profit on a loan until well after the first year or so via monthly interest payments. Yes, lenders do charge upfront fees that will be collected at the settlement table but these charges typically are used to offset the costs of originating, processing, and underwriting a mortgage application. The lender is looking longer term.

How would the lender know? In an appraisal, the appraiser will state whether or not the property is currently or even recently listed. If so, this will put a hold on the refinance. If this is you or someone you know, you can expect to be asked for an explanation as to why the property was listed. It might very well be that you had a true change of heart and decided to stay put and hold off on making another purchase. Whatever the reason, lenders will be very wary of financing a home that shows the possibility of being sold out from under them before making any profit. It’s a losing proposition for the lender.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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