Refinancing a mortgage can help homeowners significantly by making it easier for them to service the loan without defaulting. However, taking a poor approach or refinancing at the wrong time can make home refinance the worst mistake a person can ever make in their life. The following are tips on when to refinance:
i) Your Monthly Payments are Unaffordable
If the monthly payments you are currently making are unaffordable, you can refinance the mortgage to reduce the payments. This is done by spreading the outstanding mortgage balance over a longer period of time. However, you should wait for rates to go down before refinancing.
ii) You’re Paying a High Interest Rate
When you applied for the mortgage, your credit score might have been low. Interest rates at that time might have also been high. If rates are currently low and your credit has improved, you can refinance to get a more favorable mortgage rate.
iii) You Have an Adjustable Rate Mortgage
If you have an ARM, you can refinance to get a fixed rate mortgage. However, the rate on the FRM should be significantly lower.