The best time to refinance your home is usually at end of the fiscal year of the financial institution or towards the end of the month. Other factors that determine the best time to refinance your home include how long you are staying in your home, credit score, careers history, and closeness to retirement.
What is Refinancing
Obtaining a new mortgage loan to replace an existing one is known as refinancing. Refinancing allows a borrower to get a better interest rate and term. The new loan is created after paying off the initial loan. Borrowers having a perfect credit rating can use refinancing as a good means to change an adjustable rate mortgage loan to a fixed one, and also to acquire a lower interest rate.
However, for borrowers that have not so perfect, or poor credit, or those with a high debt, refinancing a mortgage might be risky. The best time to refinance your home is usually at end of the fiscal year of the financial institution or towards the end of the month.
To refinance a mortgage loan entails paying off an original loan and exchanging it with another one. Homeowners seek for refinancing for various reasons and there are several factors that determine the best time to refinance your home. Refinancing can be an opportunity to lower interest rates, reduce mortgage term, use the equity of a home to pay for a large purchase and to consolidate debt. The cost of refinancing can be 3% to 6% of the principal of the loan and it involves assessment, title search as well as application fees. Therefore, it is crucial for a mortgage owner to ascertain if the purpose for refinancing is beneficial. Generally, refinancing should be considered if one can obtain an interest rate that is at least 1% less than that of the existing mortgage. However, other factors that influence the best time to refinance your home include the cost of refinancing and the length of time you will live in the home. There are two main types of refinancing. They are rate-and-term refinancing and cash-out refinancing.
The Best Time to Refinance your Home
The right time of the year can help in getting a better mortgage refinancing deal. Financial services employees usually depend on year-end bonuses. As it gets closer to the end of the fiscal year, loan officers become more eager to close loans. Obtaining mortgage refinancing at the last quarter of the fiscal year of a financial institution’s can help in getting a better deal from loan officers who desire to have good evaluation for bonuses. Therefore, you need to know the end of the fiscal year of the financial organization as it may be different from the end of the calendar year.
Financial institutions usually set monthly targets for their staff. Loan officers try to work harder towards the end of the month. By seeking refinancing towards the end of the month, you are likely to secure a better deal from a loan officer that is eager to meet his/ her monthly targets.
Hence, the best time to refinance your home is at end of the fiscal year of the financial institution or towards the end of the month.
Other Considerations to Identify the Best Time to Refinance
Apart from timing of the year and the month, there are other factors that determine the best time to refinance your home. For example, if you are not going to live in it for more than five years, it will likely lead to a waste of time and money. Selling off your house a few years after refinancing implies that you won’t live in it long enough to enjoy the benefits of lower interest rates. In addition, you will still have the debt of the fees connected to the new loan. So it’s not the best time to refinance your home if you won’t live in it for a long time.
Also, since retirement income is usually far less than when someone is working. It might not be the best time to refinance your home when you are close to retirement. Another factor that determines the best time to refinance your home is your current credit score and career history. If your credit score reduces even slightly, you might not be qualified for the lowest interest rates, and this would make the refinancing not beneficial. Also, if you changed careers recently, e.g. switching from being a teacher to a software developer, you might be earning a higher wage, but you might not be eligible for refinancing because of your employment duration.
Furthermore, it’s not the best time to refinance your home if the savings do not add up. Carefully calculate the cost of refinancing compared to the savings you will get from it. Also consider the fact that refinancing can increase the number of years of your loan. You do not automatically benefit from lower monthly repayments if your mortgage loan term has been elongated by more years.