When is a good time to refinance your home?
published on 07/14/2014
By Michael Decker, Mortgage Originator, RCB Bank Stillwater
Refinancing your home can provide an opportunity to save money on your monthly payment, payoff your home faster or take cash out for some other purpose. A number of factors contribute to determining the best time to refinance.
Staying or Going: When determining if it’s a good time to refinance, one big factor should be if you are planning to move or stay in your home. It is generally not advisable to refinance if you plan on being in the house for only a short period of time. If you need money for a specific purpose, refinancing can be an easy way to access it. Consider how long you will be in the house and whether you actually need the money when making the decision.
Interest Rates: One of the factors to consider before refinancing is the interest rate in the market. Compare your current rate with the rate that is being offered. A general rule of thumb is to consider refinancing if the interest rate you can get on the new mortgage is around 1.5% to 2% lower than what you currently pay.
Early Pay Off: If you dream about being mortgage-free, the low-rate environment may be a good opportunity to refinance your 30-year mortgage into a 15 or 20 year loan. But make sure you can afford the slightly higher payments on the shorter loan and that you have some money saved for emergencies.
Adjustable rate to a fixed rate: If you obtain a new fixed-rate mortgage, instead of an adjustable rate, you mitigate some of the risk involved an unknown rate environment. You would need to look at your adjustment periods and what rates are currently doing to make sure this would be beneficial to you.
There are times when it makes sense to refinance your mortgage. It’s important to have a clear financial objective in mind so that you’re able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it’s best for you to refinance, based on your individual financial goals.
Opinions expressed above are the personal opinions of Michael Decker and meant for generic illustration purposes only. RCB Bank is an Equal Housing Lender. RCB Bank NMLS #798151. Michael Decker MLO# 370522.