When is the best time to refinance your home loan? Experts tend to agree that the right time is any time there’s financial benefit in it for you. When was the last time you compared your current loan against other options? Here are the top 5 reasons why now may be the right time for you to refinance your home loan:
1. Switching between an adjustable rate mortgage and a fixed rate mortgage. ARMs are attractive because they offer a low rate to the borrower up front. However, periodic rate adjustments can put you at a higher rate than current fixed rate options. In this case, switching from an ARM to a fixed rate mortgage gets you a lower interest rate, and a lower monthly payment.
On the flip side, if you’ve got a fixed rate mortgage and interest rates are falling, switching to an ARM could result in lower interest rates for you up front, as well as continuing lower monthly payments as rates continue to decrease.
2. Pay less over the life of your loan. Did you know that going from a 4.5% interest rate to a 3.5% interest rate on a $250,000 loan would save you almost $52,000 in interest over 30 years? One of the best reasons to refinance your home loan is to lock in a lower interest rate, saving you boatloads of cash in the long run.
3. Save money each month. Who doesn’t want a few hundred extra bucks in their pocket each month? Refinancing your loan not only saves you a ton of cash in the long run, it also has an immediate effect: you write a smaller check to your mortgage company each month. Depending upon the difference in interest rates, you could be saving yourself quite a bit of money.
4. Pay off your home faster. Let’s go back to the scenario in reason #2 above. If you refinanced your 30 year fixed, $250,000 home loan, and went from 4.5% interest to 3.5% interest, you’d save about $144 per month on your monthly payments. Use that $144 as an additional payment each month, and you shave about 5 and a half years off of your repayment schedule.
If you’re interested in saving money or cashing out equity by refinancing, check out our free, simple refinance tool by clicking here.