High Interest Rate Alert!~ When Should You Refinance Now

With rising interest rates, many homeowners are asking: Is refinancing still a good idea? While refinancing can be a powerful financial tool, it's important to carefully evaluate whether it's the right move for you in today's market. Here's everything you need to know to make an informed decision.

1. Check Your Current Interest Rate

The first step is to compare your current mortgage rate to what's available now. If rates have dropped since you took out your loan, refinancing could lower your monthly payment and save you thousands over the life of the loan. Even a 1% reduction in your rate can make a big difference.

2. Reassess Your Loan Term

Refinancing is an opportunity to adjust your loan term to better fit your financial goals:

• Shorter Term: If you want to pay off your home faster, refinancing to a 15-year loan can save you money on interest, even if monthly payments increase slightly.
• Longer Term: Need to reduce your monthly expenses? Extending your loan term can free up cash flow, though it may mean paying more in interest over time.

3. Take Advantage of Your Home's Equity

If your home's value has increased, you may have built significant equity, which opens the door to new refinancing options:

• Eliminate private mortgage insurance (PMI) if you now have at least 20% equity.
• Use a cash-out refinance to access your home's equity for renovations, debt consolidation, or other financial goals.

4. Factor in Closing Costs

Refinancing isn't free—closing costs typically range from 2% to 6% of the loan amount. Before you refinance, calculate how long it will take to recover these costs through monthly savings. If you plan to stay in your home longer than this “break-even point,” refinancing may be worth it.

5. Review Your Credit

Your credit score can significantly impact the interest rate you qualify for. If your score has improved since you first got your mortgage, refinancing now could help you secure a much lower rate, even in a high-interest-rate environment.

When Does Refinancing Make Sense in a High-Rate Market?

Refinancing can still be a smart move, even with higher rates, in these situations:

• You have an adjustable-rate mortgage (ARM) and want the stability of a fixed-rate loan to avoid future rate increases.
• You're carrying high-interest debt (like credit cards) and want to consolidate it into a lower-interest mortgage.
• You want to use your home equity to fund major financial goals like home improvements or education.

The Bottom Line

Refinancing during a high-rate period isn't for everyone, but it can be a game-changer depending on your financial situation. The key is to carefully weigh the potential savings, costs, and your long-term plans before making a decision.

Thinking about refinancing? Let's talk! I can connect you with trusted lenders and help you determine if now is the right time to refinance your home.