Four Timing Mistakes To Avoid When You Refinance Your Mortgage
Posted on: 4 August 2017
If your credit and your finances have improved significantly since you bought your home, it's imperative that you refinance. Refinancing can allow you to take advantage of a better deal on your mortgage loan and potentially save thousands over the life of your mortgage.
Unfortunately, a lot of homeowners don't know how best to take advantage of their improved credit and finances through refinancing. When it comes to paying off your mortgage and ending up in the best financial situation possible, proper timing is one of the central factors to consider.
The following are four timing mistakes you need to avoid to get the most out of your refinancing efforts when it comes to improving your mortgage loan:
Not refinancing at the perfect time for your unique situation
Choosing the right time to refinance involves careful calculations. If you're eligible for more favorable mortgage loan terms, you're spending more than you need to on your mortgage payment each and every month.
On the other hand, refinancing too soon could mean that you're committing to a refinance loan that might have been much better if you had taken just a few more months to pay off some debits and improve your credit score.
The bottom line is that you definitely don't want to refinance when you're just about to pay off a big debt on a car, for example, or start a new job that offers a much higher salary. Waiting just a little longer in these cases could lead to drastically improved terms.
Taking too much time to pay off your mortgage loan
The longer the term of your refinance loan is, the more you're going to pay in interest. If you can afford higher payments and a shortened loan term, go for it. This will save you money on interest and put you in a better financial position over the long term.
Neglecting to pay attention to the current market conditions
While your current income and credit standing are important in deciding when to refinance, you also want to consider market conditions. Remember that interest rates fluctuate over time.
Pay attention to the market and choose a moment to refinance when both your own debt load and current market rates are favorable.
Not taking enough time to explore your options
Don't take the first refinance offer you're provided with. Shop around to find the best terms. Don't commit to a refinanced mortgage loan until you've explored all possibilities and until you can be fairly certain that you've arrived upon the best possible deal.
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