4 Things to Consider When Refinancing a Mortgage

If you purchased a house anytime other than the past month, there is a good chance that you could save some money by refinancing your mortgage. Interest rates are the lowest they have ever been, and this could be the time to look at your current interest rate.

Consider the following things when looking at refinancing your mortgage.

1. How long have you been in your house?

If you’ve been in your house for a long time and your current mortgage is almost paid off, then it might not make sense to refinance at this point. Most interest is paid early in your mortgage, so if you only have a few years left on your mortgage, it might not make much sense to refinance.

2. How much longer will you be in your home?

That brings us to our second point. How much longer will you be in your home? If you’re planning on moving soon, it probably doesn’t make sense to refinance into a new mortgage that you’ll be getting rid of when you move. If you’re planning on staying in your home at least a couple of years, it might make sense to refinance to a new mortgage, depending on what your break-even point is.

3. What is your break-even point?

The break-even point is the point at which your costs to refinance break even with your savings. If it cost $3,000 to refinance and you could save $300 a month on your payment, you would break even at ten months. if you plan on staying in your home for at least ten months, then it would be worth it to refinance. If you were planning on selling your house before your break-even point, it probably is not the time to refinance.

4. Have you shopped around?

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Be sure to shop around before deciding to refinance. Companies can offer different interest rates, and often have varying fees. Look at both the interest rate and the cost to refinance when comparing offers. An easy way to do this is by using a site like credible.com that will give you multiple offers. Once you have an idea of what rate you might be able to get, check with your favorite lenders to see if they can give you a better offer.

Rates are currently as low as they have ever been. There is a small chance they could go lower, but even if they did go down, it wouldn’t be much. Don’t try to time the market, and if the numbers make sense to refinance, now is the right time.

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