How do I know if this is the right time?
If your home or current mortgage meets one or more of these three conditions, it’s a good time to consider refinancing.
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Increased home value.
If conditions in your local housing market have increased your home’s value, your equity went up, too. With high equity you could get a new loan on better terms. Or you can convert that equity into cash to use however you like.
Interest rates are low.
As a general rule, if you can get an interest rate at least half a percent lower than what you’re currently paying, it’s good idea to consider refinancing. If you can get more than a percent, it’s a great idea. A lower rate could get you a shorter term, lower monthly payments, savings over the life of the loan – maybe even all three.
Your current mortgage is relatively new.
In the early part of many mortgages, most of the monthly payment goes toward interest. If you can get a new mortgage that applies more of your payments toward principle, that’s good. You’ll build equity faster. It’s like paying money to yourself.