Should You Refinance Your Mortgage During June, July, or August?
The crazy fluctuations of the real estate market over the last few years has made it tough for a homeowner to know when to pull the trigger on refinancing their mortgage. After a lengthy span of record low interest rates, today’s rates are up and hovering around 7% for a 30-year fixed rate mortgage loan.
With such volatility in recent years, the current interest rate is still high enough to keep a lot of refinance prospects sitting idle on the sidelines. And even for those who might be in the position to refinance, other questions come into play, like – is summer the best time to refinance a mortgage or should I wait?
In this guide, we hope to dispel some of the misconceptions and provide you with the answers to your refinance questions.
Why Summer Usually Isn’t a Good Time to Refinance
With interest rates still higher than they have been in a decade or more, a lot of homeowners most likely won’t entertain thoughts of refinancing in 2023. Or, they’ll at least wait until later in the year when many experts predict the rates will (hopefully) fall back down closer to 5%.
This is because seasonality can play an important role in when homeowners decide to refinance, and here’s why:
In the winter months, the real estate market naturally slows down. This is largely due to the holiday season and the fact that most homeowners want to relax and not deal with having prospective buyers visit their homes. As a result, in the winter there is less demand for mortgage money. This means that lenders will try to combat that lull in business by lowering the spread in the hopes of attracting new business. This typically results in lower interest rates and this makes winter a great time to refinance a mortgage.
By comparison, summer is traditionally the real estate market’s busiest season. This is a highly active time for home purchases, so lenders will usually increase the spread, which ultimately drives interest rates up. As a result, summer may not be the most ideal time to refinance if you are looking to secure a substantially lower rate to help save money on your monthly payment to the bank.
When Does It Make Sense to Refinance in Summer?
Homeowners choose to refinance for many different reasons, and not all of them involve securing a lower interest rate as a priority. For instance, many homeowners may choose to do a cash-out refinance to gain access to the funds they need to complete major home renovation projects. An example where this would make financial sense is when you choose to refinance your home to pay for a solar panel installation. With this, even if your new interest rate is slightly higher than your current one, the utility bill savings provided by your solar system may be higher than the amount your monthly mortgage payment was raised.
In other cases, refinancing at a higher rate may be required to get someone’s name removed or added to the deed, such as in the case of a divorcing couple, the passing of a spouse, or a couple newly married.
The truth is, homeowners choose to refinance for many personal reasons and some need to do so despite interest rates not being as low as they’d probably prefer. For this reason, whether or not summer is a great time to refinance is something that only you and your situation can answer.
But if you want to refinance your home loan because you want to pay less money every month toward your loan, then most experts agree that you should only refinance if you can secure an interest rate that is at least one percent lower than your current interest rate.
At the end of the day, refinancing your mortgage needs to help you reach whatever goal you have set for yourself. If refinancing your home loan in the summer can’t help you reach your goal, then you need to acknowledge that and perhaps wait until a more opportune time.
