When Is the Best Time to Refinance Your House Mortgage?

A recent study revealed that the number of owner-occupied housing and the homeownership rates in the United States has steadily increased. This means that more people are moving away from being renters to becoming homeowners.

Typically, people apply for a mortgage to afford a new home. This entails offering an initial down payment followed by a series of scheduled payments spread across a predetermined time frame. However, homeowners can choose to refinance a mortgage to take advantage of lower interest rates, shorter terms, or better equities.

Is house mortgage refinancing for you? When is the best time to refinance your mortgage? This article will give you an easy guide to mortgage refinancing that may answer all your queries.

What Is Mortgage Refinancing?

When you refinance your mortgage, you are essentially trading one mortgage for another. You ask your bank or a lender to pay off your existing mortgage while you pay them back on different terms.

Lowering interest rates and changing mortgage terms are two of the most common reasons for refinancing mortgages. Maybe your bank had a promotion lowering mortgage interest rates, or perhaps you met a new lender that offered better terms. Both are equally good reasons to refinance a mortgage.

What to Consider When Refinancing Home Mortgage Loans

Mortgage refinancing can be a great way to save money as you pay off your mortgage. However, there are a few things you need to consider before signing a new agreement.

Refinancing Costs

Refinancing your mortgage is free. Although you will not be required to make a down payment, you have to pay to close the new loan.

Closing costs can be around 2 to 5 percent of the loan’s principal amount. This means that you can pay up to $10,000 for a $250,000 loan. Since it can be expensive, most lenders will allow you to add the closing cost to the principal balance and pay it as part of the loan. If the total cost of refinancing is higher than your original terms, you may want to retain your mortgage or find another lender.

Break-Even Point

Breaking even is when the savings that you get from a refinance will be equal to the cost. This marks the beginning of your actual savings.

You can manually compute the break-even point or use a break-even calculator. In either case, if your break-even happens longer than the time you intend to own your current house, then you may want to rethink refinancing.

Future Plans

Some people view homeownership as putting down permanent roots. Others perceive it as an investment opportunity before moving on to the next property. Knowing how long you plan to stay in the house will impact your decision to refinance it regardless of which one you are.

If you want to permanently stay in your current home, refinancing may be a step in the right direction. However, if you plan to move away in a few years, you may be better off completing your original mortgage.


House mortgage refinancing is a great way to save some money and change the terms of your mortgage. However, before entering an agreement to let a new lender take over your mortgage, you need to pay attention to the total refinancing cost and break-even point.

Refinancing may not be the ideal course of action for you if the total refinancing cost is higher, the break-even point is longer, or you do not intend to stay in your current abode. But if you are in your forever home and found a lender that offers lower refinance costs and an earlier break-even point, maybe it is time to refinance your mortgage.

Are you looking for a licensed mortgage broker that offers reliable house mortgage refinancing in West Sacramento, CA? Hawkins Home Loans Inc. is here to help you get your dream home with loan programs that suit your needs. Schedule an appointment today!