If This Happens, You Know It’s the Best Time to Refinance
Refinancing a loan is a useful way of lowering monthly payments associated with the amount. This can also help in changing up the terms of an existing loan if the borrower believes that different terms can be more advantageous or more desirable. All in all, refinancing usually involves replacing an existing loan with a new one. This makes the new terms applicable instead of the old ones.
The benefits of refinancing are tied with timing the refinance properly. As such, one must know and consider when the best time is to refinance an existing loan. Proper timing can maximise the amount of savings that one can earn, all while steering the terms of the loan in a favourable direction. One potential downside, however, is that the amortisation time restarts when refinancing a loan.
4 things to think of while considering when to refinance
Choosing when to refinance can be a tad confusing for some. Here are 4 things to help you decide when to refinance an existing home loan.
Will you lose money, break even, or earn more when you refinance?
Computing whether you will potentially lose money, get your money back or earn a tad more money when you refinance a loan related to an investment you made should be an important decision. Refinancing also involves new fees, so make sure that whatever you will save over the next few months or years is worth the work of the refinance. Try to do the math carefully to help you decide.
Is your balance with the loan still high or is it more affordable now?
If you have been paying off a long-term loan for some years, make sure that you check how much money you still have to pay off. If you think that your balance is more affordable for you and you can afford to pay it in a shorter amount of time, then you can refinance to shorten the number of years payable. This can help you pay less interest per month and save you more money in the long run.
Check the current loan numbers and values.
The market is continuously changing, and loan offers also do as a result. If you are thinking of refinancing your current loan, make sure that you are able to get a reasonable offer first. The new loan should be better than the first and should save you money and effort in the long run. Consider these and do the math carefully before you fully decide when to refinance.
Check your credit score
If your credit score is significantly better than when you first got the loan, why not try checking with your bank if your new credit score can get you a better offer? Naturally, a better credit score can help you get a good offer for a new loan. Don’t be afraid to ask your bank and negotiate for a new offer that can potentially save you some more money.