If you've been considering a refinance on your home, but you're worried about losing your Mortgage Credit Certificate (MCC), there's good news: It is possible to refinance your home while keeping your Mortgage Credit Certificate in place. However, there are a few things you need to be aware of to make the process go smoothly.
You Don't Have to Lose Out
Some people are concerned that refinancing their home will mean giving up their Mortgage Credit Certificate. This is not usually the case. When you apply for the MCC program from the very beginning, you are eligible to continue receiving your certificate for the period equal to your original loan. Thus, if you refinance your home and extend the payment out several more years, you will stop receiving the credit in those final years. However, if you choose to refinance to a shorter payment term, then you can receive the credit all the way up until the house is paid off.
First Time Refinancing
An important caveat to this program is that an MCC can only be issued for first time refinances. If you have refinanced your home multiple times, you will not be able to obtain a new MCC. Keep this in mind down the road if you are considering refinancing a second time. Also keep in mind that your credit amount is capped based on the amount that you originally qualified for, so you cannot over-finance your home and receive a credit on the over payment. Your credit will only be based on the outstanding principal balance at the time of the refinance.
Choosing a Lender for Your Refinance
The first thing you need to keep in mind when refinancing is which lender you are going to turn to. The mortgage certificate program requires that all lenders are approved by the Housing Finance Agency (HFA) and have received training on the MCC program to be eligible. Thus, if you choose to refinance with a lender outside of the program you would no longer be eligible for your certificate. Fortunately, you can turn to any of the approved lenders to find competitive refinance rates.
Updating Your Certificate
The other thing you need to keep in mind is that your Mortgage Credit Certificate is issued based on information from your lender about your interest rate and payments. Since your MCC rate is a percentage of your interest, your lender will need to contact CalHFA and give them the information necessary to update your certificate. If the purpose of your refinance was to reduce your interest rate, you may notice that your MCC also drops in dollar amount to match the same percentage as before. The MCC does not guarantee you a specific dollar amount of credit each year.
Just like before, you will not be receiving monthly payments, so you will see the change in your MCC amount at the end of the year when it is time to file your taxes, but you probably won't notice a huge difference month to month.
When to Update Your Certificate
Ideally, your refinance lender will work with you to get your Mortgage Credit Certificate updated as soon as possible after your refinance is completed. This is especially important if you choose to refinance your home with a different company than the one you originally financed your home with. Technically speaking, most of this process is done by your lender, not by you. However, you may have to provide some paperwork regarding your original certificate and loan in order to prove that the MCC was lawfully issued in the first place.
Lenders who regularly work with the Mortgage Credit Certificate program, like Ubermortgage, will be able to guide you through this process quickly and easily. They will also be able to tell you whether or not your property continues to be eligible for the credit when you go to refinance. The most important thing to remember is that you don't have to give up your credit just because you want to refinance. As long as it is your first time refinancing, there's a good chance you can continue receiving credits through approved lenders like Ubermortgage.