People make changes to their mortgages as their lives change. Maybe you’ve reached a milestone. Or maybe life threw you a curveball.
Knowing when to refinance your mortgage is just as important as understanding the dollars & cents of why. So here are four situations where refinancing your mortgage payment might be right for you.
1. You Love Your Home
You love your house, you love your community, and you’re planning to stay for the long term. If this is you – think about refinancing.
Refinancing comes with fees and closing costs, and it’s possible that you will not realize any additional savings if you only live in your home a few more years after a refinance. But you may save a great deal over time if you’ll remain in your home for years to come and you can get a lower interest rate with a refinance.
If you financed your home with an adjustable rate mortgage (“ARM”), you may want to consider refinancing. People often get ARMS when they aren’t sure how long they will live in a house since the initial interest rate is generally lower than interest rates on fixed-rate mortgages. Switching to a fixed rate loan provides more stability since the amount you pay every month won’t change over time with a fixed-rate mortgage. Plus, if there’s a big rate hike on the horizon, you may want to lock in a current, low interest rate.
2. College Is Coming up Soon
We want to give our kids the best possible education. And we’d like to send them to the college of their dreams – even though the tuition payments might seem more like nightmares.
If you have college costs, think about a refi. If you can lower your monthly payments, you may be able to use the extra money to pay for college expenses.
3. Retirement Is Getting Near. How’d That Happen so Fast?
Blink twice and you’re older. It feels like only yesterday we started working, settled down, and held our children for the first time. Now those children are bigger than we are.
And we are a whole lot closer to retirement than we thought. We’re also not as close to our savings goals as we had hoped. Sound familiar?
If it does, then now is an excellent time to see if you can lower your mortgage payment. If you can reduce what you pay every month with a refinance, you can take those extra funds sand sock’em away.
4. Today’s Interest Rates Are Lower
It might go without saying … but any time interest rates are lower than what you are paying now can be a good time to refinance. Even if you’ve got zero debt and ample savings, why not take advantage and keep extra money in your pocket each month?
One good way to figure out if a refi makes sense for you is to check out our refinance interest savings calculator.
Ditech is not a financial advisor and the ideas outlined above are for informational purposes only. They are not intended as investment or financial advice and should not be construed as such. Consult a financial advisor before making decisions regarding important personal financial matters, and consult a tax advisor regarding the deductibility of interest and tax implications.