When Is A Good Time To Refinance?

Although they are currently rising, interest rates have been at historic lows over the past few years, causing many homeowners to consider if now is a good time to refinance their homes. Before signing on the dotted line, you need to consult with the professional mortgage lender in Huntington Beach to determine if this is the best time to make this happen. Here are a few instances when it makes sense to refinance your home loan.

To Secure a Lower Interest Rate: One of the most common reasons to refinance your home is to secure a lower interest rate. Most financial experts agree that it is a good idea to refinance if you can lower your existing rate by at least 1 – 2%. Try using a mortgage calculator to ascertain if this is a good financial move for you in the long term.

To Convert to a Fixed-Rate or Adjustable Rate Mortgage: If you are planning to convert an existing rate to either an adjustable-rate mortgage (ARM) or a fixed-rate option, now may be a good time to make it happen. Making the change to an ARM is a sound practice if interest rates are still dropping and you do not plan to stay in your house for much longer. On the opposite end, you may also want to get out of the uncertainty of an ARM and move to a fixed-rate mortgage if you want some stability with your payment. Your personal circumstances at the time will dictate if this is a good decision.

To Shorten the Term of the Loan: Falling interest rates also signal a good opportunity to shorten the term of the loan. This is a popular option for those homeowners who have been locked into a typical 30-year mortgage but wish to shorten the term to just 15 years. If the interest rate drop is significant enough, you may find that your overall monthly payment does not change that much despite shortening the term of the loan. This can save you a sizable amount of money on interest over the long run.

To Consolidate Debt or Tap Into Equity Through Cash Out Refinance: It is also common for homeowners to look at cash out refinancing as a means to tap into the equity of the home or to consolidate debt. It is a type of mortgage refinance where you can borrow more than you owe on your mortgage to pocket the difference. This can be a tricky situation, making it important that you run through all of the numbers before making this decision. While getting rid of high-interest debt is always a good idea, you need to be careful that you do not find yourself in the position of spending more once you are relieved of this burden.

Prior to asking yourself if refinancing my home is a good idea, it would be a good idea to consider if this is truly the right time to pull the trigger. Understanding all of your options and running through the math with a professional will help you to make an informed decision.