When to Consider Refinancing
The best time to refinance depends on two factors: mortgage rates and how long you plan to stay in the home.
- If today’s rates are at least 2 points lower than your existing rate, you should consider refinancing.
- Refinancing a mortgage involves upfront costs, similar to those you paid for your original mortgage: title search, property appraisal, legal services and points. If you sell the home in less than five years, you risk losing this money and negate any potential savings from refinancing.
When you're ready to refinance, do your research and shop around.
- Find out if your lender charges a penalty fee for getting out of your original mortgage. Review your prepayment option carefully.
- Negotiate lower fees or better terms with your original lender; they will want to keep your business. In the meantime, talk to other lenders and see what they're willing to offer.
- Consult a mortgage adviser to help you evaluate your situation.
Refinancing has several advantages, including:
- Lower rate = lower monthly mortgage payments
- Getting out of an adjustable rate mortgage and locking into a fixed-rate mortgage
- Cashing in on the equity you’ve built up in your home