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When Is the Best Time to Refinance a Mortgage?

Authored By: Manatee Community FCU on 8/30/2019

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If you’re a homeowner, you’ve probably thought about refinancing your mortgage at some point. After all, home loans are long-term; usually ranging from 10 to 30 years. A great deal can happen in that time, including interest rates dropping, your home value increasing, the introduction of new loan types, among other market changes.

While refinancing your mortgage may seem to be extra work for you, lowering your interest rate by just 1 percent on a 30 year mortgage could save you thousands of dollars. Perhaps you’re in the position to pay off your loan quicker and want to reduce your term. There are many perks to refinancing we will discuss in this article.

Lower Interest Rates

Interest rates stayed low for years in the wake of the housing crisis. If you bought or refinanced your home before this happened, you might be paying a higher interest rate than the average rates you see right now. If current rates are ¾ to 1 percent below your current rate, it’s worth considering your refinance options.

The thing you need to understand about mortgage interest rates is that they will go up and down a little bit every week, and from month to month. This means that rates could be lower in January, rise a half-point in April and be back down in July. While experts may provide their input on interest rates, remember that they are not psychics.

Higher Home Prices

When you buy a home, you want home prices as low as possible. Refinancing is the opposite. You want your home appraised as high as you can, within reason, so that you can reap the benefits. If you have been dragging through the past few years with private mortgage insurance (PMI) tied to your leg, an appraisal that shows your home has significantly increased in value might be your way out of that extra cost. You might also decide to take out some of that new equity in cash to pay for:

  • home improvements
  • unexpected bills
  • eliminating high-interest bank & store credit cards

Significantly reducing interest on your current debts may help you get out of debt sooner, or avoid accumulating more debt.

New Mortgage Options Available

There are many reasons to keep at least an eye on the mortgage market, even if you are not planning to refinance for a year or two. Your changing credit situation (which is typically improved by owning a home) increases the options you have available. You might qualify for a lower interest rate than you expected, or have increased your income such that you could consider changing a 30-year fixed-rate mortgage to a 15-year fixed-rate loan. Nothing beats being able to pay off your mortgage that much quicker, saving thousands of dollars in interest.

Furthermore, there may also be new mortgage products out there that didn’t exist when you originally financed your home. Mortgage products can change with market demand and new governmental regulations.

Buying a home was a lot of work, but refinancing might not take anywhere near as much. If you pick a good time to refinance based on interest rates, home values and the mortgage options you now have, you could lower your payments and/or pay off principal faster.

Manatee Community Federal Credit Union is Here to Help!

Each individual’s financial situation is unique and readers can talk with a credit union representative at 941-748-7704 ext. 125 when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.



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