When to Consider Refinancing Your Home Mortgage Loan

When you think about refinancing you should think about timing.  Timing is crucial when considering refinancing your home mortgage loan.  You can get the most out of refinancing if your timing is right in regards to the current market and economy and your personal situation.

The most common reason to consider refinancing is to lower your interest rates and monthly mortgage payments.  There are different things that need to be considered when deciding if refinancing is right for you and when the best time to do it is.

Once you have decided refinancing is worth looking into there are three main things that need to be taken into consideration.  The first is how much savings would you see a month by refinancing.  The second is how much it would cost you to refinance.  And, the third is how long it would take to recover the costs of refinancing.  The one other thing you will want to consider is if you currently have an adjustable rate mortgage (ARM) should you refinance to a fixed-rate mortgage and vice versa.

To figure out how much savings you would see each month by refinancing you need to contact a lender and see what interest rate you could lock-in and compare it to the interest rate your current loan has.  You then need to discuss with the lender what fees you will incur during your refinance.  You are then able to take those numbers and calculate how long it will take you to recover the costs of refinancing.

Just like when you bought your home there are closing costs due at the time you go to settlement to refinance your home mortgage loan.  Some lenders will give you the option of adding these costs into your monthly mortgage payments rather than paying them upfront at settlement.  It is important to remember that if you pay the closing costs upfront you pay no interest on them.  Whereas, if you wrap the closing costs up into your monthly mortgage payments you are then paying interest on those closing costs. 

Refinancing can be a great option and a way to save money each month.  It is important to make sure you do all your calculations so that you can be sure refinancing makes sense for you at the time you are looking to do it.