When Is The Right Time To Do Mortgage Refinancing?

Please note: By refinancing an existing loan, the total finance charge may be higher over the life of the loan.

Homeowner thoughts may turn to refinancing when mortgage interest rates fall. Should you consider it? There are a number of good reasons why mortgage refinancing could be a beneficial decision.

• Reduce the length of your mortgage or reduce monthly payment amounts
• To a fixed rate, you can convert existing ARM (adjustable rate mortgage) – or from a fixed rate to ARM, in some cases
• Pay off school loans, credit cards, and more using the equity in your home (or maybe something fun like a vacation or major luxury purchase)

So, at first glance, it’s pretty attractive, looking at a lower interest rate. But be careful! It may not be cut and dried. By refinancing, what do you stand to gain? Take a good hard look at your current finances. These are things that, before making a solid decision, you must consider.

In the process, several things are involved including application fees, title search, and appraisal. So, one issue is affordability. How long do you plan to remain in your home? How long have you been there? To analyze whether or not refinancing is for you, these are critical factors as well.

Why Refinance?

To reduce monthly payments and to lower their interest rate – these are two of the reasons that many homeowners decide to refinance. The time is probably right, generally speaking, if, by 2% or more, you can reduce the rate. However, it can be noticeable if you reduce it by as little as 1%.

But it may not necessarily be the right time to refinance just because interest rates are low. What are some of the best ideas as to why to refinance? It’s smart to use refinance savings to allow more room in your budget or to boost retirement contributions. It’s also smart if you are trying to pay off your mortgage quicker. However, if you’re just planning on going on a spending spree, to get cash from refinancing is not the smartest move.

Don’t Forget about the Extra Costs

As mentioned earlier, origination fees, appraisal, closing costs, can amount to thousands of dollars. Will you be able to balance out the initial cost by the money saved from refinancing? That’s called the “breakeven point”. How much longer are you going to be in the home you are considering refinancing? Before you reach the payoff point if you think you’re going to move, this might not be your best bet.

Remember when you applied for your mortgage in the first place? You had to go through an underwriting process for approval. That will have to happen again. You will also need to meet credit and income qualifications. Other factors could be your home’s market value and the amount of equity you have in your home. Are you creditworthy? With the loan amount, is the home’s value in line? Can you make the mortgage payment?

Stockton Mortgage Can Help with The Refinancing Decision

We’re here for you, at Stockton Mortgage, if you’d like some help in different loan scenarios and the crunching of numbers. Every day, that’s what we do. In your area, we can help hook you up with a mortgage banker. Feel free to use our website chat service or send us a message.

Contact us today for information.