Refinancing is a term that has become very popular among homeowners these days. It is a process of ending an existing mortgage and availing a new mortgage on the same property. Lenders across the country are happy to underwrite a new mortgage as they see it as an opportunity to earn profits. Borrowers see refinancing as a tool to lower their interest rates and their monthly payments. Some home owners also utilize refinancing to release built up equity in their homes. Refinancing can be availed at any time a homeowner so desires. But is there a best time for refinancing?
How you can benefit from refinancing
Refinancing is mostly used by borrowers when they are facing hardships in paying their monthly obligations to lenders. Rate and term refinancing can help in lowering the amount of EMI or the term of the mortgage. This is usually possible when mortgage rates have fallen, and the homeowner wants to take advantage of lower interest rates. In some cases, refinancing is done to allow the borrower to take out cash from the built-in equity of his home. For example, if you bought a home for $400000 and its value has appreciated to $500000 after a year or two, you can request the lender to underwrite a new mortgage and give you the difference between the increased value and the amount outstanding against your name.
Impact of seasons on refinancing activity
Once you have decided in favor of refinancing, you need to find out the time of the year when it to carry out this exercise. Even though lenders entertain requests for refinancing all through the year, it is better to submit your application during winter season. This is the time of the year when most people are busy with their holidays and festivals and very few people are looking for mortgages to buy homes. In contrast, mortgage activity is hectic during summer months when large numbers of people are seen buying and selling homes. This is the reason why lenders often reduce mortgage rates during winter months to attract potential buyers.
The best time to refinance your mortgage is dependent upon your personal circumstances. If you are feeling comfortable because of increased income, it is a good idea to pay off a substantial part of your mortgage and get it refinanced to reduce the term. On the other hand, it is better to reduce your EMI or the loan term if you are facing hardships. However, there are costs of refinancing also. You should keep them in mind and go for a refinancing only when new mortgage is offered at 1-2% less than your current mortgage.
Contact us today to find out if you are ready for refinancing. Our team of professionals is on call to provide professional advice.