Coldwell Banker Gosslee

How To Decide If It's Time To Refinance

Has This Question Been At The Top of Your Mind?
Posted: September 04, 2019 by Jessica Wimberly

With mortgage rates at an all time low, we know that so many homeowners have been asking themselves this question: "Is now the time for me to refinance?" 

Let's start with what a Mortgage Refinance is:

A mortgage refinance is a new loan that pays off and replaces an old mortgage. It’s one of the easiest ways to restructure your mortgage debt.

The process is very similar to what you go through when you are purchasing a home. You submit very similar financial documents to the lender, an appraisal is done on your home, and you sign the final refinancing documents. Once that is completed, the lender will pay off the balance of your old loan and your new loan is in place and ready for you to make the payment!

There are many reasons why you would want to refinance your mortgage:

1.  - Your payment is too high

2.  - Your interest rate is higher than what’s available on the market

3.  - You want to payoff your mortgage in 15 years instead of 30

4.  - You want to cash out your home equity


Once you understand what you want your outcome of the refinance to be, you need to calculate your break-even point.

So let’s say that you want to refinance so that you can lower your mortgage rate, the key factor is whether or not you will save money. This is where the break even point comes in. In other words, will you save enough with a lower rate to offset the closing costs you pay to refinance?

For example:

Say it will costs you $3,000 to refinance your loan, and your new mortgage will save you $100 per month. You would have to stay in your home for 30 months to get back the money you paid in closing costs.

If you plan on staying in your home for a while, then refinancing is more than likely going to be a good idea. If you plan on moving soon or are almost done paying off your mortgage, refinancing may not be the best option for you.

The usual guideline is that you should be able to reduce your rate by a full percentage point when refinancing but we always suggest reaching out to your local lender so that they can go over all of your options with you to make sure that you are making the right financial move.

There is never a bad time to refinance.  Anytime someone wants to lower their interest rate, access equity for home improvements, or payoff home sooner, its a good idea.  That’s why they need a trusted mortgage professional to see if will benefit from. -Kelli Maggio, Mortgage Lender with Fairway Mortgage.

If you have been on the fence about refinancing, make sure to give your lender a call to see if it makes sense for you! We love seeing homeowners save money anyway they can - so we say it's worth checking out options!




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