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3 Signs It’s Time for a New Mortgage

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If you’re like me, your home is like a member of your family, complete with its own personality and quirks. And you love it because of (and sometimes in spite of) those.

Plus, like every member of your family, the home you own takes more than just goodwill to flourish—it also has financial needs, including maintenance, repairs and, of course, the monthly mortgage.

One day, you’ll pay it off. But until that day arrives, it makes sense to review your mortgage on a regular basis to ensure you’re getting the best deal. This act almost always begs the question—is it a good time to refinance?

The short answer is “yes,” if refinancing reduces your monthly payment. But the monthly payment shouldn’t be your only consideration. There are other signs to look for, too.

  1. Interest rates are lower than your original loan. In the past, experts have said it was worth the money to refinance if you could reduce your interest rate by at least 2%, but today, many lenders say even 1% savings is enough incentive to refinance. If today’s rates are lower than your existing rate, now might be a great time to refinance.

  2. You’re planning to stay in your home for a while. Even with a lower monthly payment, you need to stay in your home long enough to recoup the cost, since refinancing fees may total 3–6% of the loan’s principal. Before committing to a refinance, find your “breakeven point”—how long before the benefits outweigh the cost of refinancing. Use Mountain America’s refinance calculator and input details from your existing loan and then a refinanced loan to determine your breakeven point.

  3. You want a shorter term on your mortgage. If you’re financially more secure how than you were when you originally received your mortgage loan, you may want to refinance to a shorter term to reduce the total cost of your mortgage. While a shorter term means you’ll probably pay more each month in principal, refinancing from a 30-year loan to a 20- or 15-year loan can reduce the amount you’ll pay in interest over the life of the loan. Add it up and you could be looking at tremendous savings.

Refinancing can be a great way to save money long- and short-term, giving you more time to enjoy your home and the people living in it. But before you commit, ensure you’ve done the math, so you know that the time is right for you.

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