All homeowners at some point consider refinancing, which simply means you’re paying off your current loan and replacing it with a new one. There are many benefits to doing so, and timing can be everything to get the best terms. If you’re wondering, “when is it a good time to refinance my mortgage,” we have some great tips below.
The Benefits of Refinancing
The #1 reason homeowners decide to refinance is to save money by taking advantage of lower interest rates. Some other cases where refinancing makes great sense are if:
- It would help you pay off your mortgage sooner
- You want to change to a different type of mortgage
- You’d like to consolidate debt
- You need funds to deal with a financial emergency
- You want to finance a large purchase (i.e., a renovation)
When’s the Best Time To Refinance?
Deciding when to refinance will largely depend on the why. It’s also important to note that lenders typically require that you hold a mortgage for a set period of time before you can refinance. That might be six months or a year, for example.
To Get a Lower Interest Rate
It’s a good idea to refinance when you can reduce your interest rate and the costs associated with the refinance are made up in payment savings in a short period of time(typically 3 years or less).
To Pay Off Your Mortgage Sooner
When interest rates fall, it’s also a good time to take advantage of an opportunity to pay off your loan faster. Use our handy mortgage calculator to see how your monthly mortgage payment might shift with a lower interest rate and shorter term. In some cases, you may pay less each month.
To Convert From an ARM to a Fixed-Rate Loan
If you’re considering switching from an ARM (adjustable rate mortgage) to a fixed-rate mortgage, the best time would be before your adjustable rate begins to rise. Locking in a fixed rate before interest rates rise further is crucial.
To Eliminate Debt
If you’re refinancing because you want to consolidate debt, it’s best to do so there is significant monthly payment savings. Mortgage interest rates are typically much lower than other forms of debt like credit cards or car loans.
To Get Cash
Those refinancing because of a financial emergency don’t have much choice of when they refinance—as you don’t get to predict when an emergency occurs. But if you’re refinancing to cover a large purchase like a remodel, it’s best to wait until you’re sure the refinance will cover the purchase you wish to make and then some (in case additional costs spring up with the project).
Ready To Refinance?
Think you’re ready to refinance your mortgage and reap the benefits? Reliant Home Funding can help! Click here to get started on refinancing your home today.