If you have a mortgage on your home, it is undoubtedly the biggest financial expenditure for you. However, ever since the pandemic, the home loan market has been at an all-time low. In fact, even now, when things are coming back to normal, mortgage interest rates are still lower than the chart bursting numbers of the pre-pandemic market.
So naturally, as the rates hit the low, homeowners often take this opportunity with both hands to refinance their home loans. Refinancing basically works by replacing your current home loan or mortgage with a new home loan with new terms. According to statistics posted by Black Knight, almost 20 million people are on the potential verve of saving money via refinancing.
6 Ways You Can Tell When to Refinance Your Mortgage
Refinancing might have been on your list of financial plans, but you might not know for sure when to go for it. In fact, many people can be confused in making this decision, given how significant of an impact it can have. So if you are wondering if now is a good time to refinance your mortgage, here are some ways you can tell:
1. Lowered Interest Rates
You have read about it online, conducted your own research, and even talked about it with like-minded friends – so it is high time to accept the fact that interest rates are at a good low. Although, right when the pandemic started, the market hit an absolute rock bottom. But we were all too occupied to raise any financial matters. Hence, now is the perfect time to do so.
2. Economic Recovery to the Rescue
Currently, we are crossing a bridge of recovery from the great financial turmoils of the pandemic towards normalcy. Hence, it is safe to say that economic recovery is finally on the horizon. So all the people in significant financial distress are now finally able to put themselves in a stable financial situation where refinancing is a definitive and likely option.
3. Shorter Term, Quicker Pay Off
We all had our time to save and even build up our finances during the last two years. In fact, many people opened new startups, putting their financial precedence at a better standard than before. So now, if you are in a better financial position where a shorter-term mortgage means you’ll be able to pay off the loan quicker – it makes sense to just go for it.
4. Paid Significant Principal
If you have had your mortgage for quite some time now, there is a probability that you have paid off a significant chunk of your principal. So there shouldn’t be any further delay in refinancing right now as your new loan shall be carried out based on the lowered front of the balance. Not to mention, you’ll get amazing rates this time in the market.
5. Credit Score Has Risen
Many people worked on their credit scores in the last two years. As there wasn’t much happening on the economic front anyway, people indulged their financial standings to pay off credit card debts, make car loan payments, etc. All these factors played their part in bettering their credit score, and now as it has risen enough, a home loan refinancing for a lower mortgage rate makes perfect sense.
6. Everybody Is Doing It
Sometimes when everybody is collectively integrated towards performing similar steps – it is the right time to follow up and do the same. Yes, right now, everybody is refinancing their home loans. Because soon enough, as the world has healed from the economic disturbance of the pandemic, the market rates will rocket, and you don’t want to be the only one left behind.
Bottom Line
Timing the market and being extremely cautious about refinancing your home loan is a troublesome game to play. We suggest that you don’t predict, assume, or wait to see the mortgage rates and market situation tomorrow, especially when you have the chance of saving money and getting closer to your financial goals by refinancing your mortgage today.