So When Should I Refinance My Home?
When interest rates at a low, it’s time to refinance your mortgage. Though you may have heard that before, refinancing may not be the right choice. Outside of getting a better mortgage rate, there are other aspects to consider.
Think about the future and what you’d gain by refinancing. How long you anticipate remaining in your home. Have you considered if your home qualify to refinance?
Review these questions to see if your situation calls for a home refinance.
What Does Refinancing Get You?
The goal generally is to reduce your monthly mortgage payment or save on overall interest paid on the loan. In an ideal scenario, refinancing with achieve both. That’s not always the case unfortunately.
Depending on the remaining length of the loan and the mortgage you refinance with, you might get a lower monthly payment while paying more interest throughout the loan duration. Now if you utilize a shorter term mortgage to refinance, you may end up paying less interest but a higher monthly rate.
Do You Even Qualify to Refinance?
In order to refinance, you still need to qualify even if it makes sense in your position. Refinancing relies on multiple factors including the equity in your home, current income and credit score for example. As well, the value of the home must be higher than that of the loan. If struggling with your current mortgage, it may be very tough to qualify for conventional mortgage refinancing.
When to Refinance Your Mortgage
Every scenario is different, but in an ideal situation you’d refinance under the following conditions:
- Interest rates are currently lower than 1 percent or more of your existing rate
- You will continue living in your home for at least another 5 years
- You have applied for a refinance loan and expect to be approved