Generally, when mortgage rates dipped down, most homeowners refinance their loans. Even though the refinance activity has been dramatic over the last couple of years, it may not always be the best move for any homeowner. Knowing the right time to refinance your mortgage is a trick in itself.
So when should you refinance your mortgage?
- On a general note, if you assume that refinancing can save your money, or help with building equity, or even paying off the mortgage at a faster rate, it is a very great idea to go for refinancing. With the mortgage rates this low, even those with a new mortgage are able to benefit from the idea of refinancing.
- All the time, consider that going for refinancing on your mortgage could end up lowering your interest rates by half to a third of a quarter of the percentage point. This new development can substantially lower your monthly payment for the new mortgage.
- At all times, ensure that your total monthly savings offset the monthly cost of refinancing. However, refinancing might not be the best idea if you plan to move homes within the next two years, giving you very little time to recover the cost.
- The question about when should you refinance your mortgage isn’t entirely about interest rates; it is also about the credit being right to qualify for the right refinancing loan that you require. No knowledge or mortgage interest rates determined by a variant of market factors, but they are applicable to those with the best credit score. Learn more about improving your credit score to get low-interest rates for home loans.
Is refinancing the mortgage worth it? How does refinancing even work?
There are ways to go about refinancing your mortgage; however, finding the right loan depends on the end goal of your refinancing journey. You may want to keep away from adjustable rate mortgages to go for a fixed-rate loan that you could steadily pay monthly, or even want to shorten the term of your refinancing loan and save plenty on the interest rates.
In fact, most homeowners aim to go for a straight rate and term refinance, which significantly lowers down the interest rate one has to pay while giving them a comfortable repayment period. Some may want to get a lower monthly payment to free up plenty of money for other necessary expenses that they foresee, such as – Upcoming college tuition or auto loan payment.
How long does it take to recover the costs of refinancing?
You could go for a lower interest loan on your credit card balance which is a great move. However, if the card balances keep racking up, you can set yourself back and highly increase the risk related to these situations. Essentially, it is important to remember that the mortgage or refinance is a debt that is secured on your home, and by missing mortgage payments, you may end up losing your home to foreclosure.
The best way to calculate your break-even point for closing costs?
Say that the new refinancing mortgage saves you about $200 a month, and closing costs are about $3000.
Then $3000÷$200 on a monthly basis would be the right breakeven cost. If the plan is to sell your house prior to the breakeven period, then the refinancing option is not a great strategy to go about doing it.Get an accurate estimate with the help of our free house refinance calculator. Easy & user friendly tool created to help homeowners and renters. Calculate now to see if you are eligible for Mortgage Loan.