QandAs: Loans

When should I Refinance?

Answer:
If you want to obtain a lower rate on your mortgage

loan, or borrow money from your equity for home renovations, a mortgage refinance may be right for you. Refinancing an existing mortgage can be a wise financial move. Borrowers can save money on their monthly mortgage payments, which lets them start a nest egg for retirement.

However, choosing the best to refinance can be difficult. When interest rates hit an all-time low a few years ago, many homeowners jumped on the refinance bandwagon and profited. Now that rates have stabilized, borrowers ought to consider carefully whether a refinance is smart.

There are many reasons to refinance a home loan. Many borrowers refinance with hopes of getting a lower rate on their home loan, which in turn lowers monthly payments. Some borrowers refinance to a fixed-rate loan, whereas others choose to shorten their loan term and build equity quicker. Whatever the reason for a refinance, it is best to hold off until rates drop. Ideally, the new loan rate should be at least one or two percentage points lower than your current rate. If you're thinking about a refinance, take a look at your credit report first. Since a refinance creates an entirely new loan, the lender will review your credit and determine creditworthiness. Credit histories greatly influence interest rates. If your credit score is low, make improvements before applying for a refinance.


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