5 signs it may be time to refinance your mortgage

Is it time to refinance your mortgage? At some point throughout their mortgage term, many home owners start wondering if it’s a good time to reconsider their product. Refinancing can be a smart financial move, but it’s not the right choice every time. Your decision should be influenced by your personal needs, your future plans, and current interest rates. Here are five important factors you should consider before deciding whether refinancing makes sense for you!

#1 Your needs have changed over time

This is the simplest reason why refinancing your mortgage might make sense. The mortgage you signed years ago may not fit your situation anymore. There are a variety of circumstances where this makes sense. For example, maybe you were a first-time buyer who wanted the security of a longer amortization period. Now, however, your financial situation allows you to pay higher amounts and shorten your amortization. In this case, you will want a mortgage product that allows you to make this shift. On the other hand, if you find finances are tight and you need a bit more breathing room, refinancing could help spread your payments out. Your mortgage should accurately reflect your situation. If your mortgage no longer fits your lifestyle, it’s worth looking into alternatives.

#2 You have high-interest debt

Another sign it might be time to refinance is if you are trying to deal with a large amount of high-interest debt. You might be carrying credit card balances or personal loans, for example, which can cause some financial stress. However, you might be able to take advantage of your home’s equity. Refinancing to consolidate debt can provide much-needed relief. This rolls all your debts into one monthly payment. By combining your debts with your mortgage, you can simplify your payments and potentially access lower rates. Over time, this could save you significant money in interest. For many home owners, this is one of the most practical reasons to refinance.

#3 Shifting interest rates

Interest rates play a major role in determining if a refinance makes sense for you. If you have a variable-rate mortgage, for instance, and are having trouble managing your payments, switching to a fixed-rate mortgage through a refinance could provide more stability. On the flip side, if you have a fixed-rate product and rates have dropped compared to when you signed your original mortgage, refinancing to a variable-rate can potentially save you money over the rest of your term as well. However, in this case it’s important to ensure you will save more money than it will cost you to refinance. Be sure to chat with your broker about your options!

#4 You are planning a renovation

Big home renovations, such as kitchen remodels or finishing the basement, can be quite pricey. If you’ve built up enough equity in your home, you might be able to refinance your mortgage to access that equity. You can then use this cash flow to pay for your renovations. Not only does this help you support your renovation, but home improvements can also increase your property’s value. If you have been planning on completing renovations, refinancing your mortgage could be a good way to get you there.

#5 You plan to stay in your home long-term

Finally, one of the biggest considerations when deciding to refinance is the cost of breaking your mortgage early. Your lender will charge a prepayment penalty for this action. This can be as little as three months’ interest on a variable-rate mortgage, or as much as the interest rate differential on a fixed rate, which can be quite substantial. If you’re planning to move in the not-too-distant future, the penalties may outweigh the benefits of refinancing. However, if you know you’ll be in your home long-term, refinancing could make sense. In this case, odds are good the advantages will outweigh the costs.

Refinancing can be a powerful tool, but it always depends on a variety of factors. Consider your changing needs, future plans for your home, and market conditions. The key is to weigh the costs and benefits, and take advantage of guidance from a mortgage broker! We can help you feel confident that the choice you make is the right one for you.

If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.