Buying a home with cash-on-hand is the dream, but for most homeowners, the reality is that they need to get a mortgage to make this fantasy a liveable reality. There’s a diverse range of loan options available for different needs. Unfortunately, not all borrowers can get the better end of the stick.
Some end up with higher interest rates that exceed their budget; others are stuck with the wrong mortgage payoff. Whatever the reason, refinancing your mortgage can be a money-saving solution that can shave thousands of dollars and years off your loan term.
That alone is a powerful incentive for borrowers to refinance their mortgage, but it’s only beneficial when done at the right time. This begs the question: when does it make sense to refinance your mortgage?
Spotting the Signs that Prompt You to Refinance Your Mortgage
- Your Interest Rate Skyrocketed Compared to the Current Rate Offered by Your Lender. Not all loan options come with a fixed interest rate, which means it’s often subject to fluctuations depending on the volatility of the current housing market. Some are unlucky enough to get a mortgage during the peak of the housing boom, which means you’ll likely have an interest rate that is significantly higher than the rates offered today. If that’s the case, then refinancing your mortgage can save you from the hassle of paying off an unnecessarily higher mortgage, allowing you to put some cash back into your pocket down the line.
- Your Credit Score has Significantly Improved Over the Years. Homeowners who got their mortgage at a time when their credit score was at its lowest point may have to pay for the consequences through the years, but if you managed to boost the score up, then refinancing offers the chance to get you a rate that you deserve.
- Your Home’s Value Increased. If you made investments that have boosted your home’s value over the years, then it’s likely that you have amassed a high enough equity you can use to qualify for a refinance.
- Your ARM is Increasing. Many homeowners take on an adjustable-rate mortgage (ARM) since it offers an initial fixed-rate period that can help taper off thousands of dollars during your first three, five, or seven years into your mortgage payment. After the initial adjustment, the interest rate will start to increase and match the rate offered by the current market. When your ARM is about to adjust, it’s the prime time to refinance your mortgage since it provides long-term stability after maximizing the benefits of your ARM.
The Bottom Line: When It Makes Sense to Refinance Your Mortgage
Refinancing can be an excellent opportunity to save money for your home, but it’s not a move that can benefit every homeowner. The right timing is the key to unlocking its benefits, so the list above explores signs that suggest refinancing is the right choice for you!
Why Choose Shannon Christenot?
We’re the best mortgage broker in LA that can help make your mortgage work for you. Whether you need help with property investing, construction loans, or improve lousy credit loans, we can take the guesswork out of these requirements and ensure you can settle down into your dream home in no time.
Get in touch with us at (818) 601-2231 and get a free mortgage rate quote today!