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Refinancing My Home When to Refinance

One of the most common questions borrowers have is whether it makes sense to refinance a current mortgage loan. While every individual's situation is unique, there are common scenarios when refinancing can be a good idea.
 
Get a lower interest rate. Depending upon the closing costs of the new loan and how long you intend to stay in  your home or keep your loan, lowering your rate by as little as 1% can make a substantial difference in interest paid over the life of the loan.
 
Switch from an adjustable-rate mortgage to gain the budgetary security of a fixed-rate mortgage.
 
Switch from a balloon mortgage before the entire balance of the loan becomes due.
 
Consolidate first and second mortgages into a single mortgage with a lower interest rate.
 
A rate-term refinance has a loan amount that is precisely enough to repay the balance of your existing mortgage. A cash-out refinance has a loan amount that exceeds the current mortgage balance, enabling you to receive cash from the transaction.
 
Sometimes refinancing is not the best answer. It could make sense to wait if you have a prepayment penalty clause within your current mortgage that is still in effect. Or it may be possible to meet your financial goals in other ways, such as keeping your existing mortgage in place and getting a home equity line of credit or a second mortgage. By talking with an experienced mortgage professional, you can determine what makes sense for your situation and expectations.

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