When Is It The Right Time To Refinance?
When you refinance a mortgage you pay off the current loan and open a new one in its place. Some of the most common reasons to refinance include shortening the mortgage term, consolidate debt, get a lower interest rate, use the equity of a home in order to fund a large purchase, or to convert a fixed rate mortgage from an adjustable rate mortgage. While a home mortgage refinance may seem like a smart move at first glance, but there are times when it is appropriate and times when it is a bad idea. Sometimes it simply isn’t possible. Understanding the refinance process and knowing when the timing is right – or wrong – can save you time, money, and frustration.
When it is a good time to refinance?
Lowering an existing loan’s interest rate is one of the most common (and financially smart) reasons to refinance a mortgage. Lenders typically advise a 2 percent reduction but many are saying that even a 1 percent savings is good enough to refinance. A perk to this is that it will often decrease your monthly payment. Often lenders will offer homeowners the opportunity to refinance when interest rates fall. This can work to the homeowner’s advantage by shortening the loan without much of a change to the monthly payment.