When Should I Refinance?

Refinancing takes a little time and effort—but it can really pay off. So when's the best time to take advantage of it? Check out these questions to help you decide.

Have you paid your mortgage long enough to consider refinancing?

Generally, you'll need to have more than 20% equity in your home to refinance. Check with your mortgage lender to see if you're there yet.

Have property values been rising in your area?

A higher property value can give you even more options as you refinance. For example, your home appraisal could put you over the 20% threshold sooner than you might think.

How much can you lower your interest rate?

See if you can lower your rate by at least 1%. Many lenders suggest that this is a good benchmark for improving your financial situation by refinancing.

Are you going to stay in your home a few more years?

If you're going to stay in your home for several years, then you'll probably have time to recover your closing costs with the overall savings from refinancing. But if you plan to move in a couple of years, you might not have enough time to ensure refinancing pays off.

Do you have a good credit score today?

If you have good credit, you'll benefit by getting a lower interest rate and long-term savings. If you don't have great credit, then it's well worth it to wait. When you improve your score you can get a lower interest rate, which could save you a significant amount of money over the long run.

The bottom line

You should only refinance when the time is right. If you do it well, you can lower your interest rate, your monthly payment, and the amount that you pay for your home overall.

Keep it up. You're getting smarter about home buying.

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Will I Benefit from Refinancing?

Weigh the benefits versus the costs and see if refinancing is right for you.

For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 4.976% with 0.125 discount points and a $985 origination fee with a credit score of 740 would result in 360 equal payments of $1058.42. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 4.441% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result 180 equal payments of $1,504.56. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

For comparison purposes, a 3-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 5.214% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result in 36 equal payments of $983.88 and 324 equal payments of $1109.25. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

For comparison purposes, a 5-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 5.064% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result in 60 equal payments of $983.88 and 300 equal payments of $1101.76. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

For comparison purposes, a 7-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 4.974% with 0 discount points and a $985 origination fee with a credit score of 740 would result in 84 equal payments of $998.57 and 276 equal payments of $1097.02. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

For comparison purposes, a 10-year adjustable rate mortgage of $200,000 with a 20% down payment at an APR of 5.146% with 0 discount points and a $985 origination fee with a credit score of 740 would result in 120 equal payments of $1058.42 and 240 equal payments of $1103.43. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/17/18. Rates and programs may change at any time.

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