Should you refinance now, or wait until later? Did the perfect window for refinancing already close, or is there a chance that it can be opened again? The answer seems like a revolving door: it’s changing all the time. Everybody wants the lowest rate possible and we can help, but when should you refinance your mortgage? Let’s look a little closer to help you figure out when it’s the right time to refinance.
Lower interest rates
This one is a no-brainer – although many borrowers opt to keep their current mortgage due to fear of breaking their mortgage. Sometimes, breaking your mortgage can save you money over the long-term! It’s all about the numbers: by knowing how much you owe on your mortgage and the penalties you are facing, you can still save money if the interest rate is ideal. Speak to your lender before committing to refinancing, just know this: for borrowers with a variable rate mortgage they will pay a three-month interest penalty. For mortgages with a fixed rate, borrowers will pay the interest rate differential penalty (IRD).
Lock in an interest rate
On the flipside, when interest rates are rising it’s a good idea to refinance so you can get locked in on a longer-term interest rate before your monthly payment increases. Unfortunately, borrowers may need to pay for private mortgage insurance (PMI) if they have less than 20% equity in the home. While nobody wants to pay this, if you wait until you can access your home’s equity to avoid the PMI interest rates may have went up by then. Fortunately, if you’ve lived in your home for a little while you at least have some equity you can use. Thus, if you refinance even if you have less than 20% equity in your home it may still be worth your while to make the move. Again, reach out to us for a professional plan of action.
Access your equity
As just stated, if you have been paying your mortgage, you have untapped equity. Refinancing your mortgage can give you access to this. This can help you in the event that you want to remodel your home, are facing a life crisis, or simply need extra money for an investment. Want to know how much equity you currently have? Simply subtract the amount that’s left on your mortgage from the market price of your home – the final number is the amount of equity you can use today.
Consolidate your debt
Refinancing your mortgage can be beneficial beyond your home. If you have outstanding debts – such as student loans, credit cards, miscellaneous loans, etc. – refinancing can allow you to gain equity to your home so you can consolidate it and have a single interest rate for everything. This is an awesome strategy if you can lock in on an interest rate, and it may be the deciding factor regarding whether or not refinancing your mortgage is right for you. Sure, you’re going to face penalties and fees and maybe you will even have to deal with a PMI. Still, if it means all of your debt can be consolidated to one low interest rate you may seriously want to consider refinancing. Again, contact us before you make any sudden decisions and let us tell you whether or not refinancing is right for you!