5 Reasons it’s Time to Refinance Your Home Mortgage Right Now

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Refinancing your mortgage is one of the best ways to save money and reduce your monthly expenses. Many people plan to refinance for years before starting the process, but here are 5 reasons you shouldn’t wait.

1. Interest rates are at an all-time low

In the midst of the coronavirus pandemic, interest rates have dropped dramatically. Across the world, interest rates have dropped to all-time lows, often under 3%. For example, in Australia, interest rates are as low as 2.74% and many Australian citizens have already refinanced their mortgages.

The U.S. Federal Reserve initially lowered interest rates to an all-time low, under 3%, to help a struggling economy. While short-term interest rates are still low, they have been slowly rising as states commence with reopening plans and economies seem like they will begin to recover.

You’ll probably never see interest rates this low for a long, long time. If saving money is critical, consider refinancing your mortgage to take advantage of these low rates.

2. If you wait too long, interest rates will rise

Normally, banks lower interest rates to attract refinance customers. When large numbers of people request to refinance their mortgages all at once, banks don’t have an incentive to lower interest rates.

If you’re going to refinance your mortgage and take advantage of lower interest rates, now is the time. However, it’s important to view quotes from various lenders before making any decisions about refinancing.

3. You’ll start saving money sooner

The sooner you refinance, the sooner you’ll start saving money.

The amount of money you can save by refinancing your mortgage can be drastic. You could potentially save hundreds of dollars each month. CNBC published an article about a homeowner who was able to refinance and save $450 per month.

Another way you’ll save money by refinancing is being able to stop paying private mortgage insurance (PMI). Refinancing will readjust the percentage of equity you have in your home (in your favor) and if that percentage equals 20% or more, your lender will usually allow you to drop PMI.

When you wait to refinance your mortgage, you’re putting off saving money that you could be tucking away in a savings account, using to pay other bills, or investing.

4. You have a good credit rating right now

A lot can change in a short period of time, especially during uncertain times. If you’ve got good credit right now – enough to qualify for a good interest rate – don’t wait to refinance. For reference, 760 or higher is considered an excellent score.

Anything can happen in uncertain times. For example, say you end up losing some of your income and you have to consolidate your debt rather than continue making your usual payments. It won’t take long for that to show up on your credit report. Even if you have no problem making all of your payments, if anything negative shows up, lenders won’t offer you optimal interest rates.

5. Your employment can be easily verified

It sounds more than obvious, but if you are employed full-time and your employment is easily verified, start the refinancing process immediately. Lenders won’t approve refinance requests if you’re on unemployment or you have become recently unemployed.

Since so many people have been losing their jobs because of the coronavirus shutdowns, lenders are verifying employment multiple times during the refinancing process. Employment is verified in the beginning of the process and also again closer to closing.

If there’s any chance that you might lose your current job, refinance your mortgage as fast as possible. Even if you can get a new job quickly, lenders won’t view a new job the same way.

It’s important to have a documented, reliable employment history when refinancing your mortgage. You might have a heavily padded savings account that can carry you for several years without a job, but most lenders won’t care. They want to see that you have a reliable source of regular income. For many lenders, unemployment income doesn’t count.

There are exceptions. Some people can refinance while unemployed, but it’s not easy and usually requires a co-signer.

Home prices are rising – refinance today

Home prices are rising all over the world, especially in the United States. Cities like San Francisco and Seattle are experiencing a surge in home sales for high prices.

What does this have to do with refinancing your mortgage? If your goal is to save money, you might be considering buying a cheaper home. Depending on where you live, a new home with a new mortgage could end up costing you more money. Your best bet is to refinance now while interest rates are low.