When Should I Refinance?

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The answer to this question is highly personal and has many layers to think through in order to answer. Defined below are some common types of refinance and also some reasons why one may be something to consider.

Rate/Term Refinance:

This allows the borrower to shorten their term, improve their rate (or both). It also can be done to consolidate a first and a second mortgage that were used to purchase a home or to consolidate a first with a variable HELOC that has not had any draws in the last 12 months. A rate/term refinance allows the optimal rate typically to accomplish these goals.

Cash-out Refinance:

This can be utilized for debt consolidation in general, cash-out for home improvements, or paying off higher interest debt that also may be variable. This will most typically have a slightly higher interest rate than a rate/term but the tangible benefit may be significant enough to make sense to do so. Surprisingly, the rate on this scenario can also be lower than your current rate.

Other reasons a refinance may be in your future include:

1. To get out of an adjustable rate mortgage or balloon payment note;
2. A life change such as a divorce requiring debt settlement; 
3. To get out of an FHA mortgage that carries mortgage insurance; 
4. Cash IN refinance where the customer has significant funds to pay down a mortgage and wants to take the opportunity to improve rate/term.

Each situation can be very different which is why there is no real “rule of thumb” to answer exactly when refinance can/should be considered. It is important to sit down with a knowledgeable mortgage loan officer to evaluate needs.. You want to ensure that a refinance transaction has a strong tangible net benefit to help you make this important decision.

Reach a member of our mortgage team.

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