When Is the Best Time to Refinance?

Deciding the best time to refinance your mortgage can be difficult, especially if you are having financial difficulties. When you are in dire need of money, you might be forced to use your home equity to make ends meet. However, waiting for the right time to get refinancing can spell the difference between keeping and losing your home. Here are some factors that will help you ascertain the best time to enter into mortgage refinancing.

Personal Credit History

Before you even think about when it is the best time to refinance your mortgage, you have to check your credit history or rating. Even if you were able to secure loans before, it does not mean that you will automatically get refinancing deals that are advantageous to you. A negative credit rating would mean high interest rates and a shorter loan repayment period. It is important that you check your credit score. Make sure it is good and free from errors before you apply for refinancing. If you do not have a good credit score, it would be a good idea to work on boosting your rating before applying for mortgage refinancing, or any other type of loan for that matter.

Market Value of Your Home


You will know that it is the best time to refinance your home loan if the market value of your home has increased significantly. This is particularly advantageous if you are getting a refinance loan for the purpose of consolidating your debts.

Interest Rates

One of the most important things to do when thinking about refinancing is to determine the interest rate applicable to your loan. Even if you are in dire need of money, you should be very careful when accepting refinancing terms with an interest rate that is higher than the one being applied to your present mortgage. In order for your refinancing to be worth considering, the interest rate must be at least 2 percent lower than that of your present home loan. Remember that refinancing also involves a lot of fees and costs, so getting a refinance loan with an interest rate that is just 0.5 percent lower than what you are already paying may not be cost effective.

Economic Climate


Not many people are aware that the economic conditions of the country, or sometimes the entire world, can greatly affect the prevailing interest rates. Inflation and consumer spending are factors that affect the government’s decision to increase or decrease prevailing interest rates. As a rule of thumb, when consumer spending is high and the economy is upbeat, the interest rate will most likely be increased. In contrast, a slowdown in the economy usually precipitates a decrease in interest rates to help boost consumer spending.

Length of Time after Taking Mortgage

Many loan providers slap high interest rates and charges on loans for people who apply for refinancing shortly after they have had their mortgage loans. The best time to refinance your loan is usually four to seven years after you have taken your mortgage.

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