How to Determine the Best Time to Refinance Your Home Mortgage

Determining the best time to refinance your home mortgage can take some effort on your part, but if you educate yourself on market trends, your research might help you save a lot of money on your mortgage. There are a number of circumstances that contribute to when and why you should consider refinancing your home mortgage. Do your homework, break out the calculator and in the end you just might just save yourself some money.

Difficulty: Easy

Instructions

1. Search online at Web sites like Monster Moving and Bank Rate (see below) to find current home mortgage rates, including time length of mortgages and required downpayments, if any.

2. Call and verify the advertised loan rate. Make sure you speak to a loan officer who confirms the advertised rate. Better yet, ask to have the advertised loan rate mailed or emailed to you for your records.

3. Compare your current mortgage rate with the advertised rates. If you can lower your mortgage by at least half a point, it may be time to refinance your home mortgage. If you can reduce it by two points, then it is almost assuredly time.

4. Watch interest rates. If you currently have an adjustable mortgage interest rate that is a half to two points above the fixed current rates, the time might be right to refinance your home mortgage into a fixed rate.

5. Decide how long you are going to stay in your current home, or at least how long you think you might stay in your current residence.

6. Do the math. Will you pay more in closing costs than you will save on your remaining monthly payments in your current home if you refinance?

7. Choose the bank that offers you the lowest interest rate and best overall deal.

Tips & Warnings

• Generally speaking, if you are staying in your current home for less than two more years, it is not advisable to refinance your home mortgage.
• Always read the fine print. Even mortgages that advertise no-cost or low-cost closings charge fees. Be careful because these fees could be labeled under another name, so be sure to understand all aspects of your refinanced mortgage before signing on the dotted line.
• Before refinancing, check your current loan for any prepayment penalties. Some loans will charge money to pay off a loan early. If such a penalty exists, factor those costs into whether it's really a good idea to refinance.