Over the years there has been much discussion about the best time to refinance your home. The advice covers how much money you can save both in interest on your loan and monthly payments. At the same time, there are many recommendations on the best time of year to refinance your home. We will explore some of these ideas below. However, the best time to consider a refinance is right now while interest rates are still historically low! And sometimes saving money isn’t the only reason to refinance.
Timing Influences
Usually when thinking of refinancing a current mortgage, we typically want to lower the current interest rate. Throughout the years the rule of thumb was to always refinance if you could reduce your interest rate by at least 2%. And then when rates started to slip into single digits, it was considered enough of an incentive to refinance at a rate at least 1% lower than what you’re currently paying.
There are also thoughts that certain times throughout a month or year can be more advantageous for refinancing. One thought was that if a broker or lender received a year-end bonus for their book of business, they might be willing to negotiate a lower rate. This has not proven to be wise advice because of not knowing if this is a fiscal year versus calendar year, for example, or having knowledge of a bonus at all. The same holds true for month-end deals. Again, some believe that you can get a better rate if a broker or lender must meet monthly targets.
Refinance Considerations
Today, with interest rates as low as they are, it’s the best time of year to refinance. And there are many considerations – some that will save you money now and in the long run. Others might make your current living conditions better or at least easier even without saving money.
It’s important to remember that refinancing will have costs associated with the process. Therefore, you’ll want to have an idea how long you plan to stay in your house to make sure you understand when you will break even. Your lender can give you all this information.
Another detail about refinancing is that lowering your monthly payment will not always save you money over the long term. However, if you have just opened your own business, perhaps lost a job, or have a life-changing event – it might be to your advantage to refinance to a longer-term loan to lower your monthly payments.
For anyone with an adjustable-rate mortgage (ARM), you will want to consider moving into a fixed-rate mortgage while interest rates are low.
With the competitive marketplace today, your home may have increased in value. If that is the case, it might be an ideal time to refinance with cash out for remodeling or debt consolidation. At the same time, if your home has decreased in value, it’s usually not a good time to refinance.
If you’re currently paying private mortgage insurance (PMI), you may be able to refinance and eliminate PMI. Likewise, you’ll want to be sure refinancing doesn’t add PMI to your loan which can offset any savings with a refinance.
Now is the Time
Interest rates have stayed historically low over the last year, and it’s hard to predict how long these rates will stay at these record lows. If you have any questions about refinancing, changes in your household, or upcoming life events that might alter your financial picture, now is the best time of year to talk to your lender about refinancing. Your mortgage lender can give you a full review of the pros and cons about refinancing your current mortgage for your present situation and long-term plans.
The mortgage bankers at Kalamazoo County State Bank are happy to review your refinancing options. They are experienced, local and know your community marketplace. Call today at 269.679.5291 or visit online at https://kcsbank.com/mortgages/.
Loans are subject to credit review and approval. Kalamazoo County State Bank is an Equal Housing Lender.
