When Is the Best Time to Refinance Your Mortgage?
You hear the ads on the TV and radio. The offers are there in the mail. You know it’s true – refinancing your mortgage can make a big difference in your budget. A simple change from 7% interest rate to 6% interest rate can bring you an extra $130 per month on a $200,000 home. But when is the best time to refinance a loan? Hereare some suggestions.
Refinancing Your Home - Pros and Cons
Pros: The reasons you want to refinance would be to decrease your interest rate, to reduce monthly payments, or if you’re looking to consolidate your debts.
Cons: There are some reasons you might not want to refinance your mortgage. Refinancing often can lead to decreased savings because of increased closing costs. Also, you may have less interest to claim in your income taxes.
When It’s Worth It
The best time to refinance will depend on you and your situation. However, here are a few reasons to refinance:
- If you can find a rate at least 0.375% lower and break even within 24 months.
- If you can find a rate at least @.375% lower and break even within 36 months, if you plan on staying in your home at least five more years.
The Best Timing
We’ve all heard the tales of local police and their ticketing quotas — what do we do in response? Watch out at the end of the month. The same is true for car dealerships — they’re much more intense with their salesmanship at the end of the month as they strive to reach their quotas. And the same is true with loans – studies have concluded that the best time to refinance is in the last two weeks of the month.
Likewise, the best time of the quarter to refinance is the last month of the quarter – March, June, September and December. Pulling all of that logic together, studies have shown that the best time of the year to refinance would then be the last two weeks of the last quarter – December.
The reason for this is that year-end bonuses make up a great deal of income in the financial industry. There is an uneven focus on what was done throughout the year, and the emphasis is highest on the second half of the year and specifically the last month. So the last two weeks of December seems to be the very best time.
Remember that making the decision to refinance depends on many factors. Consider your situation, do the math, seek out multiple mortgage companies and remember that timing can be everything.