Looking Into Refinancing Your Mortgage? Read This First
Interest rates haven’t exactly been kind to home buyers and homeowners interested in refinancing their mortgages over the last few years, but they are slowly moving back in the right direction. As a result, those homeowners looking to refinance their home loans are finding themselves once again back at considering their options.
But if you’re like most homeowners, you might be wondering – at what point is it worth it to refinance my mortgage?
Or, you may have other questions, like:
- Is there a time of year when refinancing makes more sense?
- Can refinancing help me meet my financial goals?
- Am I refinancing for the right reasons?
- What’s the value of refinancing my mortgage right now?
If these questions are on your mind, then this post will help clear up some concerns, so you can make the most informed decision about your home’s mortgage.
Is There a Time of Year When Refinancing Makes More Sense?
Since mortgage rates fluctuate all throughout the year, there is no specific season that makes for a better time to refinance than others. But there are certain times of the month that can provide you with a better refinance experience. Traditionally, the last two weeks of the month are the best time to close on a mortgage refinance simply because it allows you to avoid paying extra mortgage interest for that month.
Similarly, there are certain months when refinancing makes better sense. These are the months that end each quarter – March, June, September, and December. It is during these months that loan officers are usually more likely to close new loans in hopes of finishing the quarter strong.
Can Refinancing Help Me Meet My Financial Goals?
For most homeowners, their homes are their largest investments. This makes it particularly useful in helping them achieve certain financial goals. For instance, if you have enough equity in your home, you can do a cash-out refinance to gain access to the funds you need to complete home renovations that will help increase the value of your home.
If you want to refinance your mortgage simply to help free up some additional money every month, then most experts agree that you should only do so if you can get approved for an interest rate that is at least one percent lower than what your current interest rate is set at.
Am I Refinancing for The Right Reasons?
Not everyone refinances their mortgages for the right reasons. If you’re considering refinancing to get the money you need to make a large purchase like a vehicle, a vacation, or some other luxury, then that money isn’t being utilized to its best potential, and this can be a big mistake.
It’s also unwise to refinance your home to pay off outstanding credit card debt because you will be replacing your unsecured debt by increasing your secured debt, which is secured by your house. Before refinancing, it is very important to make sure that you are doing it for the right reasons and not for reasons that can increase your risk.
What’s the Value of Refinancing My Mortgage Right Now?
What do you stand to gain by refinancing right now? Will you only be able to save a little bit of money every month in exchange for having to pay closing costs? Will you be better served to wait to see if the interest rates drop any lower before refinancing?
At the end of the day, refinancing your mortgage needs to provide you with some sort of value. If you can’t see the value in your refinance, then that’s a clear sign telling you that you may want to wait.
What to Know Before You Refinance
Many homeowners start the refinance process before fully understanding what is involved, and there’s a lot you need to know about before you refinance. For instance, you will need to meet all the same lender requirements that you had to meet when applying for your first mortgage. So, if your credit score has dipped since you were first approved, then that isn’t going to help your chances.
Likewise, you need to have money for closing costs as well as a down payment. These costs can of course be rolled into your new mortgage, but doing so will also undermine some of the savings you are looking to achieve. Plus, if you don’t have at least 20 percent equity in your home, many lenders may not even consider your application to refinance.
Refinancing your mortgage can provide you with several benefits, but only if everything lines up properly. So, before starting the process, speak to your lender to find out if you are a good candidate for refinancing in today’s market. Getting as much information as possible from an industry expert you trust is essential for helping you make the best decision for your household’s financial future.
