When you buy a home, you’re responsible for paying your mortgage for the next 15 to 30 years. And while some people might like the idea that their mortgage will remain the same during that time, others might be waiting for the right time to consider refinancing.
In the right situations, refinancing your home mortgage can make a lot of sense. To show you when this type of situation could be good for you, here are three reasons to consider refinancing your home mortgage.
Interest Rates Have Lowered
At the time when you first secured your home loan, you might have had to settle for an interest rate that was higher than you would have liked. In a situation such as this, noticing that the market now has lower interest rates available could mean it’s a good time to try to refinance your current mortgage rate.
According to the staff of Investopedia.com, it’s often worth it to try to refinance your loan if you can get at least one percent in savings from the interest rate you are currently paying to what you could be paying. The lower the interest rate, the more savings you’ll be able to get. But if the interest rate would be less than a percentage point, it might not really be worth it to you to try yet. It’s usually better to wait for better rates.
You Can’t Afford Your Mortgage How It Is
While this isn’t the ideal time to refinance your mortgage if you’re wanting to get ahead financially, there might come a time where you simply can’t afford the monthly mortgage payments that you own. If this happens, refinancing your mortgage could help you keep you with your mortgage payments and secure your home.
When you do this, Rob Berger, a contributor to Forbes.com, shares that you take however you currently owe on your loan and stretch that out to a 30-year mortgage, which can significantly lower your monthly payment. While this will cause you to pay more in the long run, it might be worth it if you’ve fallen on hard financial times that you expect to turn around in the future.
You’ve Improved Your Credit Score
The interest rate you can get for your mortgage loan has a lot to do with what your credit was when you applied for the loan. If you were able to secure a home loan with your less-than-ideal credit in the past but have since seen your credit score rise significantly, Kira Botkin, a contributor to Money Crashers, shares that it might be a good time to see what your rates would be now if you refinanced.
If you’re wondering why you might want to refinance your home mortgage loan, use the tips mentioned above to see if one of these situations could apply to you and help you save some money in the process.