How to Refinance: When is the Best Time?

• Do you currently have an adjustable rate mortgage or ARM product? If so, you'll want to refinance into a more stable mortgage product, such as a 30-year fixed rate mortgage, before your interest rates get too high. Adjustable rate mortgages can be great when you're just dipping your toes into the housing market, but they can become problematic when interest rates rise and your home loan payment goes up with them. When interest rates are low, lock one in that will provide a consistent payment for years to come.
• Is your current interest rate higher than current market rates? Imagine that you currently have a mortgage with a 6.5% interest rate, and your monthly payment is $2,528. If you refinance to 6% interest on the same home loan amount, your payment could drop to $2,398. This could save you $130 per month. Over a 30-year period, this adds up to a savings of $46,800--quite impressive!
• Do you need cash? Your home equity can be a great source of cash for home remodeling or debt consolidation. Instead of moving into your dream home, create it in your existing home with a cash-out refinance. This type of loan will allow you to maintain your current property tax rate, and have a tax-deductible interest payment as well.