Knowing when it’s the right time to refinance your mortgage depends on a number of factors. Understand what you need to consider to decide when and how to refinance your mortgage.
When it comes to refinancing, consumers often have to pay thousands of dollars in closing costs upfront to save tens of thousands of dollars over the lifetime of their loan. Deciding whether or not refinancing is a sound financial decision can require hours of research, knowledge of your financial situation, an estimate on how long you plan on staying in your current home, and other mortgage calculations.
Many factors contribute to the fees associated with a refinance loan. Homeowners could pay thousands of dollars in fees to refinance a home loan, including costs for a refinance application fee, appraisals and loan origination fees.
If a homebuyer purchased a property several months ago and has a $225,000 mortgage at a 6.25 percent interest rate, it might seem that paying $3,500 to refinance is too costly — but it will save him a bundle. If he qualifies for a new loan rate of 5.25 percent, despite paying the new closing costs, he can still expect to save close to $40,000 over the lifetime of the new loan.
This strategy is not advised for people who plan on moving out of their house within a few years, as it will be difficult to recoup the new closing costs in the guise of reduced mortgage payments. But if you plan on staying rooted for a long time, it’s a good idea to start researching refinancing options now.
Figuring out your financial strategy when it comes to a mortgage refinance can be tricky, but it shouldn’t cost you any money to find out how much you could save. You can get guidance and valuable advice by talking to a home loan expert, who can help you identify your options. You should also ask your lender to detail all the reasons it’d be worth your time to refinance.