After refinancing home mortgage

Forum|Forum|5 years ago
September 13, 2020
2 replies
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My credit score went down 51 points after refinancing my home mortgage. Is this to be expected?

Best answer by Anonymous_

Some level of decline is to be expected, particularly if several hard inquiries were made in the process.

You should review your credit reports, which you can get free from the site below, for accuracy.

https://www.annualcreditreport.com/index.action

You might also want to check your credit score with Turbo --> https://turbo.intuit.com/

The Experian site below has further information.

https://www.experian.com/blogs/ask-experian/does-refinancing-a-personal-loan-hurt-your-credit-score/

Anonymous_Answer

Employee

Some level of decline is to be expected, particularly if several hard inquiries were made in the process.

You should review your credit reports, which you can get free from the site below, for accuracy.

https://www.annualcreditreport.com/index.action

You might also want to check your credit score with Turbo --> https://turbo.intuit.com/

The Experian site below has further information.

https://www.experian.com/blogs/ask-experian/does-refinancing-a-personal-loan-hurt-your-credit-score/

Opus 17

Employee

That's completely normal. Remember that your credit score is just a crude way of evaluating your credit worthiness for your next loan. Presumably you aren't applying for a new loan right after refinancing.

Refinancing does a number of things that all will lower your score, at least temporarily:

one or more "hard" credit checks on your file
opening a new loan and increasing your total debt
paying off and closing an old loan, because it may decrease the average length of your credit history, and it also decreases your apparent borrowing power.

The hard credit checks will drop off your report in 2 years. As you make payments on the new loan, it will get older (longer credit history= good), your total debt will go down (good) and your total debt as a percentage of your borrowing ability will go down (good).

(Somewhat bizarrely, having a $100,00 mortgage balance on a loan that started out at $150,000 a few years ago, is better for your score than paying off that loan and replacing it with a brand new $100,000 loan.)

Wemason1

I refinanced my Seller financed- financed mortgage. No 1098 but a 1099-Int pink form. That confused the IRS and one year I received a $5000:- balance due, penalties and interest. Had to write a letter to refute all charges! IRS removed the charges, without an explanation. Of course I was close to fainting opening that letter..

When I first had the Seller-financed loan in 2016 I had no problem filling in the information and it ended up on Schedule A , with all of the information for the lender and continued until 2020.

Now I am getting all tangled up. There is a Form 1098 for the new loan. Then there is the pink Form 1099-Int and the two do not get along. The worksheets for Mortgage interest get confusing between the Form 1098 information and the 1099-Int. Would be very grateful if someone could guide me through this.

Thank you very much!

Opus 17

Employee

@Wemason1 wrote:

I refinanced my Seller financed- financed mortgage. No 1098 but a 1099-Int pink form. That confused the IRS and one year I received a $5000:- balance due, penalties and interest. Had to write a letter to refute all charges! IRS removed the charges, without an explanation. Of course I was close to fainting opening that letter..

When I first had the Seller-financed loan in 2016 I had no problem filling in the information and it ended up on Schedule A , with all of the information for the lender and continued until 2020.

Now I am getting all tangled up. There is a Form 1098 for the new loan. Then there is the pink Form 1099-Int and the two do not get along. The worksheets for Mortgage interest get confusing between the Form 1098 information and the 1099-Int. Would be very grateful if someone could guide me through this.

Thank you very much!

I don't understand your situation. A 1099-INT is for interest income you received. A 1098 is for mortgage interest you paid. Who holds your loan? Who issued the 1099-INT? Did you actually receive interest income? Who issued the 1098?