How low will they go—is now the time to refinance?
The uncertainty of living during a pandemic brings a lot of questions with it, especially in regards to financial decisions. For instance, deciding whether now is the right time to refinance your house may be a source of stress for you. But don’t worry – we have some thoughts on how you can decide if now is the time to refinance:
You probably learned about the Great Depression while you were in school. But, if you take a closer look at history, you will see that the economy is less like a straight line and more like the path of a yo-yo as it ebbs and flows. Living in one of the low points is never ideal, but rest assured that even in leaner times, refinancing is still possible.
Looking at the Present
So you know what has happened before – now it’s time to look at your current situation. What do you hope to accomplish through refinancing your home? Are you looking for a lower interest rate, or do you hope to adjust the terms of your mortgage? Knowing your goals will allow you to move forward with a plan.
Looking to the Future
Is the house you’re in the one you plan to stay in for the next few years? In other words, will you really benefit from refinancing your home? Look for the “break-even” point on your mortgage options to see if the new payments will make sense for the amount of time you plan to stay in your current home.
Decide if You’re Ready
Your mother probably once asked you if you would do something wrong just because your friends were doing it. The same concept applies here – just because interest rates are low, or because you have seen friends successfully refinance their homes, does not mean it’s the right time for you. Take the time to decide if this is the best step for your current circumstances.
Research the Process
If you have never refinanced before, the process will feel a lot like buying your home for the first time. But it’s still a good idea to research the steps you will need to take and what types of materials you may need to have available, like loan documents or other paperwork. There are multiple resources out there to help you find the information you need.
Find an Expert
Your questions don’t have to go unanswered – talk to someone, like your accountant, about the questions you have and what you can expect from the refinancing process. Someone who is already familiar with your current financial situation will have better insight on what you can handle.
Look for the Signs
Just as you might keep track of deals that car dealerships are offering, it’s a good idea to keep your finger on the pulse of economic developments. For example, while you can’t gauge whether refinancing is the right step for you based off low interest rates alone, seeing those rates go down means you are more likely to get a better rate if you refinance.
Check Your Credit Score
Times are tough, and if your credit has taken a hit since you last refinanced your homes, you may not be able to take advantage of all the options available to you through refinancing. Be sure to check your credit score before refinancing (which we recommend you do regularly anyway) to keep track of any changes.
Consider Your Job Stability
Just like when you bought your home, refinancing factors in a steady income. If you are not sure whether your job will be around in a few months, or if you will be working steady hours, you may want to wait until you are settled into more reliable employment.
Take the Plunge
If you think this is the right time to refinance, then don’t wait – go ahead and start the process. It may take several months to finish your refinancing, so the sooner you can make the decision, the sooner you can enjoy your lowered interest or shortened mortgage term.
Only you can decide if the time is right to refinance, so do your research and consider all of your options. It may not be the right time for you, and that’s okay. If it is, go ahead and take that first step.