When is the right time to Refinance?

Are you considering a home mortgage loan refinancing but do not know if its the right time?

Have you considered refinancing your existing mortgage?

There are many things to consider when attempting to refinance instead of just seeing that rate on TV or the internet. Here are a few quick points to review and compare to your situation.

The refinance rate

Is your current rate higher than what is being advertised? Remember that the rate on TV or the internet might not be the rate for the program you want. Also depending on your situation you may not even qualify for that rate. After you are offered a rate, compare it to your current one. Typically consumers will look for at least a full 1% lower interest rate.

The refinance terms

Will you be decreasing the number of years or months left to pay in your mortgage? With a lower rate you might be able to change to a lower term (maybe 15 or 20 years) and still have a comparable payment. Remember the ultimate goal of home ownership is to pay off the mortgage(s) on your property.

The refinance costs

How much will it cost in total fees? Good rule of thumb to go by, if you are unable to recover the amount of closing costs over the first 1 to 2 years of the loan it might not be worth it. Remember that when the closing costs are "rolled into" the new loan you are increasing the loan and paying those costs over the loan term.

The reason to refinance

Instead of the obvious lower rate, are you getting cash for home improvements, consolidating debt or changing into a fixed rate from an adjustable rate mortgage? Even if the rate is not significanly lower another reason could still make it beneficial. Taking funds to imrpove your home will increase the value of your home. Consolidating debt will improve not only your monthly budget but also your credit. Getting rid of your adjustable rate mortgage (ARM) for a fixed rate will give you the certainty of payments with no chance of your rate increasing.

Remember that everyone's situation is unique. What is good for your friend or neighbor might not be right for you. Do your research and be sure you cover each question before determining the path of your refinance. Enlisting the assistance of a professional for your mortgage refinancing could save time and money.