Is it time to refinance your home?
Refinancing your mortgage is a strategy many homeowners use to renegotiate their mortgages and lower their monthly payments. When the time is right, it can significantly benefit you and help you save.
Here are four signs it may be time to refinance:
A lower interest rate is possible
Mortgage interest rates are in constant flux. Talk to your lender about refinancing when a lower interest rate is possible. Refinancing your mortgage loan with better terms can mean saving hundreds of dollars on your monthly mortgage payments.
A good rule of thumb is to wait until rates are 1-2% lower than your current rate.
Your credit score has improved
In the time that you purchased your current home, has your credit score improved? Your credit score greatly impacts your mortgage interest rate, as lenders want to see that you are financially responsible.
The value of your home has increased
Your home’s value impacts whether you can refinance because your home is used as an asset during the refinance process. If the value of your home has increased and you can afford it, you can try for a refinance.
You have an increase in income
Before refinancing, make sure you have enough money to cover closing costs. Yes, when you refinance your home, you are essentially taking out a new mortgage loan, so you will need to go through the closing process again. Refinancing may be right for you if you have increased income and favorable conditions.
When it’s a good idea to wait for a refinance
Just because a refinance is available to you doesn’t mean that it’s the right choice right then and there. If you’re close to paying off your mortgage, there’s no point in refinancing. Before stepping into a refinance, talk to your lender and financial advisor. They will be able to help you determine if it makes financial sense.