When Is the Right Time to Refinance Your Home?

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It seems like experts are constantly making predictions about the housing market: the momentum in the housing market might be changing, the market keeps getting worse, and, yes, the market is even showing improvement. All the arguments have valid points, because the truth is, it’s difficult to know what the housing market will do. This makes it hard for homeowners to know what to do, particularly if they are considering selling. Should buyers sit on their homes for a while, sell immediately, or consider refinancing? Refinancing for a new loan with a different interest rate can be a great idea, but it isn’t always the right time. Plus, it can be difficult to predict when you will get the best interest rate.

Average fixed mortgage rates dropped this week, to 4.27 percent for a 30-year loan. Still, rates are generally higher than they were a year ago. It may be a good time to refinance as far as interest rates go, but deciding whether this is the right time to refinance will depend on more than just interest rates.

People who refinance too often face closing fees, and unless you wait a certain amount of time (depending on your mortgage and interest rate) between refinancing, you actually won’t be saving money. Refinancing isn’t necessarily a good idea even if you do it once, especially if you plan to sell your house soon. Different lenders have different fees, but common ones include an application fee, escrow fee, title fee, appraisal fee, points for your mortgage loan, a loan origination fee, and possibly other fees, as well. If you calculate how much you will save with a lower interest rate or longer/shorter loan length and you plan to move before you will recoup the costs, then this is not the time to refinance. Try calculating how long it will take you to break even.

Once you know whether it would actually benefit you to refinance, you need to determine if you are even eligible to refinance. You will go through a processes that’s similar to when you originally took out your mortgage loan. Your lender will look at your income and assets, debt, how much your property is worth, your credit score, and how much you need to borrow.

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