Best Time for Home Refinancing

Plymouth Title Guaranty Corporation Best Time Home Refinancing

Homeowners have tried figuring out the best time for home refinancing for an exceptionally long time. Even prior to COVID-19, many people were unsure about the appropriate time to consider refinancing, particularly those who have never owned a home before, or are unfamiliar with the refinancing process.

The historically low mortgage rates that have come alongside the outbreak of the Coronavirus pandemic have left multitudes of homeowners itching to take advantage of low rates to and refinance their homes.

It is easy to understand why. Low interest rates make for low mortgage rates, which is great when refinancing. Makes sense, right?

In the wake of the Coronavirus, low interest rates have led to a significant increase in the number of people trying to take advantage of what may seem like an ideal time to refinance. Additionally, increasing unemployment rates as well as concerns about future job security are leading people to consider refinancing as a means of decreasing monthly mortgage payments and easing the worries of impending financial hardship.

However, low rates do not automatically mean you should call your mortgage company and try to refinance right away. It is not an easy process, and it also does not come cheap.

There are some situations where it is best to stay with your current mortgage, but how do you know when to stick with what you have or when to shoot for those lower interest rates?

Home Refinancing When Rates Are Low

It probably feels like there is no reason not to refinance when rates are low, but while it may seem a logical time to contact your mortgage company and try to refinance immediately, that is not always the case.

Before you jump to take advantage of low rates, it is important to consider what type of loan you have. If you have a smaller loan, the benefits of refinancing just to knock off a tiny amount of interest may not be worth it.

You need to take the bigger picture of a refinance into consideration. Contemplate the fact that closing costs could be between 2% and 5%, meaning that the reduction of your interest rate by only a tiny amount may not be worth the costs you will have to pay upfront to go through the refinancing process itself.

There is also a second scenario in which low rates may not automatically ring the refinancing alarm bells. If you do not intend on staying at your current residence for a long time, or if you plan on selling your home soon, refinancing simply will not be worth the costs. It is better to just stick it out until you sell and buy a new home.

There is, however, a third scenario in which low rates will benefit your refinance, and you absolutely should take advantage of them.

If you have a mortgage with an interest rate around the 4% mark (or higher), or a jumbo mortgage, times when interest rates are low are your best friend when it comes to refinancing. Lower rates mean paying significantly less interest on the lifetime of your loan, knocking even close to one percentage point off your interest rate could massively benefit you in the long run.

Bottom Line on Home Refinancing

Generally speaking, if you meet the following three criteria, it might be a good time to consider refinancing your home:

  • If interest rates are at least 1% lower than your current interest rate.
  • If you plan on living in your current residence for the near future (at least the next 3 years).
  • If you anticipate that you will not have any issues being approved for a new loan.

If you feel confident that you check those three refinance boxes, it could be the right decision for you. Do not just jump on the bandwagon immediately because rates are historically low or everyone else seems to be refinancing. Remember, each situation is different, so the right time to refinance for another homeowner may not necessarily be the right time for you.

To learn more about the best time for home refinancing, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.

Please note: The safety of our staff and clients is our highest priority.  Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:

All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office

  • If a party to the closing is not feeling well, please contact your closer prior to the closing so appropriate precautions can be taken.
  • We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash hands before entering our office.
  • Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders.
  • All pens used in the closing will be given to the client after use.
  • All closing rooms will be cleaned and disinfected in-between each closing.
  • Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will plan for delivery to the lobby or parking lot of our office.
  • All staff will refrain from shaking hands before or after closings and ask clients do the same.

Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.