When’s the Right Time to Refinance Your Mortgage?
Refinancing a mortgage is a very attractive option, especially when the interest rates hit new lows. However, it’s important that you don’t immediately jump in without considering all the options.
Refinancing might seem great, but there are many considerations that you need to keep in mind if you want to ensure the best deal. Throughout the next few sections we’ll talk about the right time to refinance your mortgage.
Determining Your Goals and Objectives
Refinancing your mortgage is all about restructuring it so that you are closer to your goals and objectives. For example, you might have a 30-year mortgage, but have now decided that you would benefit from a shorter-term. On the other hand, you might have high interest rates and would like to minimize these as much as possible.
Determining your goals and objectives will work wonders when it comes to refinancing your mortgage; you’ll be able to easily understand whether refinancing is a good option for you or not.
Do Some Calculations and Look at What’s Available
After you have determined your goals and objectives, the next step is to do some calculations and look at what’s available on the market. There are many calculations that you’ll need to do in order to see whether it’s worth it or not.
First and foremost, you should look at the closing costs for your current mortgage. For a $200,000 loan, you can expect this to be around $3,000 – $4,000. Then, think about how many lower monthly repayments it would take to recoup these closing costs — this is a great place to start.
Look around and see what’s currently available; if you find a loan that fits your criteria perfectly and can offer you a lower interest rate and more savings, it might be the perfect time to refinance now!
Don’t Forget the Risks
Before you go ahead and refinance your mortgage, you should make sure that you take all the risks into consideration. It can be easy to jump into a new mortgage agreements when you see savings, but this is why it can be so risky!
Always think in the long-term, do some calculations and make sure that you can afford to pay off the mortgage in the forthcoming years. Typically, you’ll be committing to a longer term when you refinance.
Closing Notes
After reading through the above sections, you might have come to the conclusion that now is the right to refinance your mortgage. On the other hand, you might think that you should never refinance your mortgage simply because you have a good deal at the moment and it wouldn’t be worthwhile.
Refinancing really is as subjective as it seems, it might help some people, but it could also be very damaging to others.