Staying current with mortgage refinancing is a smart financial habit. As interest rates and economic conditions fluctuate, keeping an eye on the market can help you make money-saving decisions.

Keep Your Goals in Mind

Would you like to lower your monthly payment? Reduce your loan term? Perhaps you’d like to tap into your home’s equity and use the cash to achieve a financial goal? Refinancing can be the most effective tool for each of these objectives if you act at the right time and with the right lender.

Why Consider Refinancing?

Many homeowners choose refinancing for:

  • Lower Interest Rates. A mortgage with a lower rate can reduce monthly payments, saving thousands over the loan term.
  • Switch Loan Types. Going from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage can provide more predictability.
  • Shorten Loan Term. Going from a 30-year to a 15-year mortgage can build equity faster and reduce interest costs.
  • Cash-Out Refinancing. Your home’s equity could cover major expenses like home improvements, debt consolidation, or education.

When Should You Refinance?

Consider refinancing if:

  • Rates are below your current mortgage rate (even a 0.5% drop can be worthwhile).
  • Your credit score has improved since you secured your loan.
  • You’ve built significant equity in your home (typically 20% or more).
  • Your financial goals have changed (e.g., you want to pay off your mortgage faster).

ABC: Always Be Calculating…

Interest rates and market conditions are one part of the equation. There’s also closing costs, your home’s value, and your equity in that value. As they may factor into refinancing terms, you’ll also want to know your credit score and your DTI (debt-to-income ratio).

  • You can explore the range of interest rates you may receive here.
  • You can calculate your estimated refinancing costs here.
  • You can estimate the value of your home here.
  • You can get your free credit report here.
  • You can calculate your DTI here.

When should you hold off on home refinancing?

While refinancing is a powerful financial tool, you might want to keep it in your toolbox if:

  • You plan to move. Closing costs are usually between 2% and 5% of the loan amount. It can take between two and five years to break even on those fees.
  • Your credit score has dropped. Take action to improve your credit score and revisit refinancing.

Above all, you’ll need to partner with a trusted lender. To talk about that partnership and to see if refinancing is right for you, contact a member of the Decker Group at (972) 591-3097 or connect with us online.