Refinancing your mortgage at the right time

Knowing when to pull the trigger on refinancing your home can be challenging. Interest rates have been historically low for several years now, but some owners fear that the current fluctuations in the mortgage rate can be a signal that rates could be on the incline soon. A refinance essentially pays off your mortgage and secures a new loan at a lower rate. This is only particularly advantageous if the lower rate is at least a half a percentage lower than your current mortgage rate. Begin by plugging your numbers into a reliance calculator available on the web. Make sure to consider all your options before making the leap into refinancing.

Mortgage Refinancing

Depending on the age of the homeowner, it may not be prudent to refinance so close to retirement or once you are over 1/3rd through a 30-year mortgage. Depending on your financial situation, a shorter-term mortgage may be a viable option. A 15 or 20-year mortgage will yield equally lower rates, but the shortened borrow term will result in greater payments each month. While you will be done paying for your home sooner or at the very least close to the original date before the refinance, you must ensure you can afford the increased payments. After all, the point of a refinance for many borrowers is the lower monthly payment and more money freed to add back to savings.

If the decreased term mortgage isn’t a reasonable solution for your particular situation, then consider the traditional term mortgage and use the savings to make additional payments each month toward the principle. Additional money towards the principle will save in interest cost and assist in paying off the loan sooner than the 30-year term.

Mortgage rates are not one size fits all, so shop around before signing on the dotted line. Your credit rating will determine your final rate and if you lack the knowledge to do the shopping, consider hiring a mortgage broker to find you the best deal in the market.

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