You might be considering whether it’s still a good idea to refinance given that interest rates are still higher than they were a year ago. Good question.
The purpose of a refinance is to replace your existing mortgage loan with a new one. There are many benefits of a refinance and it doesnt only involve reducing your interest rate. Homeowners who wish to modify their loan term, waive their private mortgage insurance (PMI), or do other things will also find it useful.
Refinancing isnt beneficial for everyone. It depends on your specific financial situation. If you think you might save money by refinancing your mortgage, start by providing some basic information to find out how much you might be able to save.
Refinancing your mortgage can be a great way to save money on your monthly payments but when is the best time to do it? Some people believe that the beginning of the month is the best time to refinance, while others believe that the end of the month is better.
There are pros and cons to both approaches so it’s important to weigh them carefully before making a decision.
Advantages of refinancing at the beginning of the month
- You’ll have more time to shop around for the best rates. If you start your search at the beginning of the month, you’ll have more time to compare different lenders and find the best deal.
- You’ll have more time to gather the necessary paperwork. Refinancing a mortgage can be a complex process, and you’ll need to gather a lot of paperwork. Starting your search early will give you more time to get everything together.
- You’ll be able to lock in a lower rate. Interest rates fluctuate daily, so if you lock in a rate at the beginning of the month, you’ll be protected from any rate increases that may occur later in the month.
Advantages of refinancing at the end of the month
- You’ll have a better idea of your monthly expenses. If you wait until the end of the month to refinance, you’ll have a better idea of your monthly expenses. This will help you determine how much you can afford to pay each month on your new mortgage.
- You’ll be able to avoid paying prepaid interest. When you refinance, you’ll have to pay prepaid interest for the days between the closing date and the end of the month. If you refinance at the end of the month, you’ll only have to pay prepaid interest for a few days.
- You’ll be able to take advantage of any end-of-month promotions. Some lenders offer special promotions at the end of the month, so you may be able to get a lower rate or better terms if you wait until then to refinance.
Ultimately, the best time to refinance your mortgage depends on your individual circumstances. If you have time to shop around and gather the necessary paperwork, then refinancing at the beginning of the month may be a good option. However, if you need to save money on prepaid interest or want to take advantage of end-of-month promotions, then refinancing at the end of the month may be a better choice.
Here are some additional factors to consider when deciding when to refinance:
- The current interest rate environment. If interest rates are low, it may be a good time to refinance, regardless of the time of month.
- Your credit score. Your credit score will affect the interest rate you qualify for. If you have a good credit score, you’ll be able to get a lower rate.
- The amount of equity you have in your home. The amount of equity you have in your home will affect the amount of money you can borrow when you refinance.
- Your personal financial goals. What are your financial goals? Are you looking to save money on your monthly payments, or are you looking to pay off your mortgage faster?
Once you’ve considered all of these factors, you’ll be in a better position to decide when the best time to refinance your mortgage is.
When is the best time to refinance your mortgage?
Theres no set rule for when you should refinance. It depends on your budget, plans as a homeowner and goals. Refinancing your mortgage could help you achieve your goals of paying off your loan more quickly and lowering your rate or payment.
Here are some guidelines for when refinancing might be smart:
- It is possible to lower your interest rate by up to 1%. To do so, check Freddie Mac’s weekly rate updates and compare them to your own. According to the majority of experts, refinancing is worthwhile if you can reduce your rate by at least 1%. A half-point could be advantageous in some circumstances, particularly for larger loan amounts (where even a small percentage can have a significant impact on long-term expenses).
- You intend to stay in the house long enough to benefit from refinancing, so figure out your breakeven point, or the month you’ll recover your closing costs, to decide if it’s worthwhile. For instance, if you refinance $5,000 and save $150 a month, your breakeven point would be reached in about 33 months (5,000 / 150). It’s probably worth the money to refinance if you intend to stay in the home for at least 33 more months.
- If you don’t have enough cash on hand and would have to charge expenses on a credit card with a high annual percentage rate, you should think about doing a cash-out refinance. This method can typically save you money over the long term on mortgage loans because they typically have much lower interest rates than credit cards and other financial products (including refinances). Cash-out refinances are another popular method among homeowners to combine multiple debts, such as credit card bills, into a single loan payment.
By answering a few simple questions you can determine if a mortgage refinance makes sense for you. Or use the table below to crunch the numbers.
If you do opt to refinance, consider doing it toward the end of the month. Due to the fact that you will only need to prepay interest for a few days, this will lower your closing costs. At the end of a quarter, when mortgage lenders might be trying to hit quota (and possibly offer better deals to do so), you might also think about refinancing.
When should you avoid a mortgage refinance?
Although it may seem advantageous to refinance your mortgage, you must first determine if you qualify for one. In this case, timing and the current state of your personal finances are key.
Here are some guidelines for when refinancing might not be the best idea:
- You recently purchased a home: Refinancing soon after purchasing a home is typically not a smart move. This is because some lenders charge prepayment fees, and paying closing costs twice raises the breakeven point. In essence, these penalize you for repaying your mortgage loan ahead of schedule.
- You are unable to obtain a lower interest rate: If refinancing would require you to exchange a low interest rate for a much higher one, it might not be the best decision. While there are some situations in which it might make sense, raising your interest rate will ultimately result in higher interest rates since it will only increase your monthly expenses.
- You have a low credit score: If your credit score is low, you probably shouldn’t refinance. Poor credit typically translates into higher interest rates, which could cut into the potential savings from a refinance. Generally speaking, borrowers with scores higher than 740 are eligible for the best interest rates offered by mortgage lenders. There are ways, however, to improve your score.
If youre not sure what rate youd qualify for, use an online tool to find out now.
Should You Close At The End Of The Month
FAQ
What is the best time of the month to close on a refinance?
Should I close at the beginning or end of the month?
When should you not refinance?
When can I refinance for a better rate?
When is the best time to refinance a mortgage?
The best time of the month to refinance your mortgage is the last two weeks of the month. The best time of the quarter to refinance your mortgage is the last month of the quarter: March, June, September, December. Finally, the best time of the year to refinance your mortgage is when rates are declining and lenders are hungry for business.
Should I refinance my mortgage?
Refinancing your mortgage can be a smart financial move, potentially saving you money on your monthly mortgage payment or on total interest over the life of your home loan. Before you apply, you’ll want to think carefully about when to refinance your mortgage.
Should I schedule my refinance closing?
As detailed earlier, there are pros and cons to trying to time your refinance closing. If you schedule the date for the end of the month, you’ll pay less in accrued mortgage interest. But if you slate your date for earlier in the month, you’ll have more time before your first new mortgage payment will be due.
Should You Close Your refinance on the last day of the week?
The day of the week you opt to close may make a difference, too. “Your refinance closing date can save you money if you choose to do it preferably on the last business day of the month, unless it falls on a Monday,” explains Cliff Auerswald, president of All Reverse Mortgage in Orange, California.