The best time to refinance your mortgage

For homeowners looking to cut costs and save money, a refinance is often one of their most attractive options.

By simply taking out a new loan to replace an existing mortgage you could, in theory, get a lower interest rate, thus lowering your monthly payment. You may be able to consolidate your debt into a shorter period of time than originally agreed upon, so you can pay off your debt faster. This saves you a significant amount of interest you would have otherwise paid.

Even with rising mortgage interest rates, Many homeowners in the US will still benefit from refinancing their debt. If you think you might be one of them, start by answering a few short questions to see what rates you qualify for.

Not sure if you would benefit from a mortgage refinance? Read on to see if you fall into one or more of the following categories.

The best time to refinance your mortgage

Here are the three best times to refinance your mortgage.

When you can lower your interest rate

It may seem obvious but some homeowners overlook the benefits of refinancing when they find they can only get a new rate that’s half or a whole point lower than their current one. But do the math (the calculator below can help). Even a rate that’s just one point lower could save you thousands of dollars over the life of the mortgage, depending on how many years you have left.

Low interest rates have multiple benefits. In addition to saving money, it also increases the amount of equity you have in your home (because you’re paying less in interest and more in mortgage principal). And the savings come twice: over the life of the loan and immediately in your lower monthly payments.

You can now easily discover what interest rate you qualify for by answering a few simple questions.

When you can shorten the loan tenure

Mortgage payments are consistently one of the highest that Americans have to battle every month. And with traditional mortgages with 30-year terms, it can feel like a never-ending bill to pay.

A mortgage refinance, however, can significantly shorten the term of the loan – allowing you to save money and build equity at the same time.

Just crunch the numbers to see if it works for you By shortening your term, you can increase your payment each month. But if the ultimate goal is to pay off the debt as quickly as possible, it may be worth dealing with the short-term ups and downs knowing that there is light at the end of the tunnel.

When you can change from an adjustable rate to a fixed rate

Adjustable rate mortgages (also known as ARMs) can be beneficial when you start out with a lower interest rate. But follows a pre-determined length that will vary and rise. This can quickly lead to a mortgage payment that you simply cannot afford.

Market volatility and the stress of an unknown interest rate can be mitigated, however, by refinancing into a fixed-rate mortgage instead. This ensures your peace of mind and stability that the interest rate you have at the beginning will remain the same for the life of the loan.

A mortgage refinancing expert can guide you through this transition.

Other considerations

If a traditional mortgage refinance doesn’t seem like the best route, there are other options that can help put cash back in your pocket.

• Cash-out refinancing Allows homeowners to take out a new home loan for an amount greater than what they owe on their current mortgage. They can then use the new loan to pay off the old loan and take the cash difference between the two for themselves.
• A Reverse mortgage Allows homeowners (62 and older) to tap into their home equity. The homeowner will not make any payments but will instead be paid by the mortgage lender through various methods. However, if the house is sold or the owner dies, the loan must be repaid.

Not sure which option is best for you? A mortgage refinancing expert can answer your questions and guide you to the right option.