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Should You Refinance Your Mortgage Now?

5 Min Read

You don’t have to stick with your mortgage loan terms forever. You have the power to change them through refinancing.

So, you may be wondering, is this the best time to refinance? The answer is that it depends on your situation.

Are You Looking for a Better Deal?

The mortgage rates are not very low this year. If you entered your mortgage with a lower rate than the current market rate, this may not be the right time to jump on this decision. Whenever you’re trying to refinance for a better deal, you should aspire to get a rate drop — at least a drop of .75% to make a difference. So, if you’re happy with your mortgage terms, but you’re hoping to push your rate a little lower, then you might have to sit tight and wait.

Are You in a Financial Pinch?

You should only consider refinancing at this time if you’re feeling a strain in your budget — and your mortgage payments are a major source of this strain. While the market rate is currently high, refinancing might not be a terrible plan in your case. You could benefit by extending your amortization period. Extending your amortization period will make you spend more in the long run, but it could make your monthly mortgage payments much easier to handle.

What Else Can You Do to Manage Your Payments?

Refinancing isn’t the only way that you can make your mortgage payments easier to handle. These are some other financial steps you can take to ease the pressure.

Cancel Mortgage Insurance

You may have had to sign up for mortgage insurance as a part of your agreement with your lender. Did you know that you don’t have to pay for it forever? The lender should automatically terminate your mortgage insurance after you’ve hit a certain threshold. If you reach 78% of your mortgage payments or the halfway point of your amortization period, your lender should cancel it.

You also have the power to cancel your policy early. Once you’ve reached 20% home equity, you can request cancellation. This should add some money back into your bank account.

Reassess your Budget

You may need to reassess your budget and see what variable expenses you’ll need to adjust in order to comfortably pay your mortgage every month. Some variable expenses that you can adjust are your entertainment, transportation and clothing expenses.

Strive to have some padding in your budget. You don’t want to have every penny accounted for. You’ll want to have some savings leftover for emergency expenses and price increases. For instance, inflation could be making your grocery spending more expensive.

Look Into a HELOC

You might have built enough home equity through your payments to be eligible for a home equity line of credit (HELOC). Many owners use their HELOC as a safety net for payments related to their property, like mortgage payments when they don’t have enough in their accounts. With this backup plan, you’ll never have to worry about missing a mortgage payment.

HELOCs can also be used for emergency repairs and replacements regarding household essentials like plumbing, electrical and HVAC. If you don’t have enough equity to access a HELOC, you could turn to borrowing options to cover emergency repairs when you don’t have enough savings available. Find out what are online flex loans to learn how they can be useful in these types of situations. You just might be eligible to apply for one when you’re in need.

You should only refinance when the time is right. If you stand to benefit from the decision, don’t do it. There are other ways to save money.

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