When Should I Refinance My Mortage?

Typically, when current mortgage rates start to decline, and you've had your loan for over a year, you may start to think about refinancing. Some factors you will need to consider include the amount of equity you have in your home, the mortgage balance and the difference between your existing rate and the current interest rate in the market.

Some homeowners refinance to substitute a fixed-rate loan for their old adjustable-rate mortgage, settle divorces, eliminate mortgage insurance or reduce the term of payment. 
As to the why... rate-and-term refinancing can potentially save you money, allowing you to refinance the remaining balance of your mortgage for a lower interest rate and a more financially agreeable repayment term. Cash-out refinancing, whereby you’d take out a new mortgage for more than you currently owe and take the difference in cash, can be a viable option for those who are in need of extra money to cover a debt or major expense. However, if you decide to go with cash-out refinancing, be careful. Using it to pay off credit card debt will certainly reduce the interest rate on your card. But the balance you transferred from the card to your mortgage may have you ultimately paying thousands more in interest since you’re now taking up to 30 years to pay off that balance. Also, think twice about converting unsecured debt into secured debt. Missing a credit card payment can result in harassing calls from debt collectors, not to mention a lower credit score. Missing mortgage payments can result in the loss of your home to foreclosure. 

A good credit rating can help save money on a new mortgage if your creditworthiness allows for an improved rate from when the home was originally purchased. That savings can be significant over time if you intend to stay in the home.

Before you take the plunge and refinance it's important to figure out your “break-even point.” That’s the time necessary for your mortgage refinance to pay for itself. If, for example, it would take you 30 months of lower payments to repay the closing costs and you don’t plan on staying in your house that long, it’s probably a good idea to stick with your current mortgage and not refinance.

Overall, refinancing your mortgage can be very beneficial financially and is sometimes even necessary. Think it through carefully and consider all the pros and cons before moving forward. When you're ready a SIRVA Mortgage consultant is here to talk you through the process. Get started here or call 844-299-8150.