Timing Mortgage Refinancing

refinancing home

When you’re considering mortgage refinancing, you need to know that the better your timing, the better your chances will be to save money. For instance, if you choose to refinance when the rates are at an all time low, then you will be able to reduce your mortgage payments substantially, increase your equity, reduce the term of your loan or get much needed cash out of your home, but you have to know about the timing so that you can fully take advantage of the low rates that the market might offer and avoid the higher interest rates that we so often encounter.
You need to also take some things into consideration when you are planning to refinance your existing home loan so that you can make the most educated financial decision possible and ensure a healthy financial future and present.


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Know The 2% Rule
When you are considering mortgage refinancing, you need to consider the 2% rule and how it can apply to you. Consider refinancing only if you know that you can drop your current interest rate by at least 2%, which will help to ensure that you lower your monthly payments and can get back the cost of refinancing within a reasonable amount of time.

You should know that there are requirements that you have to be able to meet such as having a good credit score and it’s usually a good idea to have at least 20% of your home’s value in equity to ensure that you won’t wind up being upside down on your home. You should also make sure that you plan to stay in your home for at least two to five years to ensure that you can realize your savings and recoup the costs of your loan.

Know Your Financial Goal
When a homeowner chooses mortgage refinancing, they have something that they want to accomplish. What do you want to gain? Do you need to consolidate credit cards and other debts? Others need the additional cash they can get from their home equity and many people want to shorten the term of their loan and reduce their overall monthly payments.

You need to know what you want or need to accomplish so that you can decide what type of mortgage is best for you. If you simply want to reduce your monthly payments and reduce your interest rate, then a straight mortgage refinance with no need for additional money is your best bet and you will likely benefit the most from a refinance when you choose to use it in this way. When you know what you are hoping to accomplish financially through refinancing your home loan, you can make the best choices for both the short and long term future.

Know When To Refinance
Often, when a homeowner chooses to refinance their mortgage, they wind up sitting on it too long and don’t benefit much from lower rates that they could have gotten if they had acted more quickly. Don’t let this be you. Especially if you just want a fixed rate mortgage and have good credit, but are looking to reduce your overall monthly payments and interest fees, then you need to make sure to act when interest rates are down. Then, to be on the safe side, you should also take the time to lock in any numbers you are quoted until you close on your mortgage refinance.

You should also remember that if you have been paying on your loan for quite some time, say 10 years, but you still have about 20 years to go, your best bet will be to consider taking a lower interest rate, but shortening the term of the loan to 15 years, which could keep your monthly payments about the same, but save you thousands of dollars in interest over the long term and get your mortgage paid off that much sooner.

Take your closing costs into consideration when you choose to refinance your mortgage, because if you don’t have the funds to do this, then you will not benefit from a refinance deal as much as if you had the cash for fees up front.

When you are looking into mortgage refinancing, you might feel overwhelmed. You may consider sticking with your current mortgage if it is all too hard. If you really want to save money and have a clear goal in mind, then it would do you well to consider refinancing your mortgage at a good interest rate so that you can save money and carve a solid financial future for yourself.

Gina Wilson

Another post from Gina Wilson – Credit & Loans Specialist Blogger.

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