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.
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 principal, that’s good. You’ll build equity faster. It’s like paying money to yourself.