Homeowners don’t refinance their loans every year but often evaluate getting new loans within four years of their last refinance. It usually takes that long to recoup the previous costs to refinance. You can refinance as often as you want as long as there is a financial benefit to you.
Begin by taking into account how many years are left on your present mortgage. If it is 20 years or less, talk to your lender about adjusting the term of a new loan to an equal number of years.
An adjustable-rate mortgage (ARM) typically will adjust in year five and change every year thereafter. If you have an ARM, it may be timely to refinance if the new ARM rate will be higher than the present 15- or 30-year fixed rates. Refinancing to a fixed rate will eliminate the unpredictability of what your mortgage payments will be.
The surging home values of the past four years have increased the equity positions of most homeowners. It may be timely to refinance and leverage some of that equity by eliminating any private mortgage insurance, provided you now have at least 20% equity in your home. Having 20% or more equity also enables you to be able to refinance to a better interest rate.
A cash-out refinance may be an option if your home’s value has increased and you need funds for major expenses like home improvements or education. Most loans require a six-month seasoning period before allowing a cash-out refinance.
Know your break-even point before you refinance. It will tell you if you are losing money by refinancing. Calculate your break-even point by dividing the cost of the refinance by the monthly savings. The resulting number of months tells you how long you should wait before refinancing again.
Please give me a call so we can see if a refinance will benefit you.