When Is It Worth It To Refinance My Home? 3 FAQs

In the world of finance, good timing is important. Whether applying for a new credit card, buying a car, or taking out a home mortgage, you want to make sure that your actions are well-timed.Take a home mortgage refinance as an example. A mortgage refinance is when you take out a new mortgage loan on your home at a new interest rate, thereby paying off your old loan and getting a new one with more attractive loan terms.The reason why timing is so important is that there are a number of factors that go into taking out a mortgage loan. While none of these factors are directly within your control, with the proper knowledge and tools you can determine whether this may be a good time to refinance.If you are wondering, “When is it worth it to refinance my home?,” here are 3 FAQs to consider:1. What factors should I consider when deciding whether to refinance my home?A: The factors that come into play are: your current monthly mortgage payment amount, the total amount you want to borrow for your new mortgage*, the amount of your closing costs, and your new loan interest rate.* Note regarding the total amount you want to borrow: for most people, this amount will be exactly equal to the balance of their existing mortgage. However, some people may choose to take out additional funds in order to pay for home repairs or to pay down high-interest credit card debt.You will want to find a good mortgage refinance calculator in order to determine what your breakeven point would be (in months) given the new loan. For example, if your breakeven point turns out to be 14 months, that means that all things considered, you would need to stay in your home for at least 14 months in order to come out ahead financially as a result of the refinance.2. What shall I assume the new interest rate will be?A: Go online and look up today’s average rates for the type of mortgage loan you are looking for. Then, depending upon your credit score, you can estimate a range from a point or two higher and a point or two lower than that average rate. Try different interest rates using your mortgage refinance calculator.3. How many lenders should I apply to in order to be sure I got the best rate?A: Different lenders will offer you different deals on a new interest rate. Therefore, be sure to apply to at least 3-5 mortgage refinance lenders to make sure you are getting the best rate.Consider these 3 FAQs as you determine whether it is worth it to refinance your home loan.