Refinancing your home is when you pay off your existing mortgage and replace it with a new mortgage loan. The old rule of thumb on refinancing was you needed to save one percent on your current rate. Every homeowner has different financial goals and needs, so saving one percent shouldn't always be the deciding factor in refinancing.
Although lower interest rates are a great way to save money, there are other reasons you may want to think about refinancing.
- Has your credit score improved? Significant increase in your credit score from when you signed your loan could get a better interest rate.
- Do you have an adjustable-rate mortgage? If rates start to rise, you’ll want to switch to a fix-rate mortgage loan.
- Do you need to consolidate debt or need home improvements? Mortgages typically have the lowest interest rates, so a cash out refinance can be the way to get cash and use the money how you want to use.
- Are you making more money? If you get a higher paying job, you could decide to refinance and convert to a 15-year loan to pay it off sooner and save money on interest.
Taking the time to review your finances, equity, and current interest rate could save you money. Speak with a home loan advisor now to see if refinancing is right for you.