Home · June 26, 2020

When to Refinance a Mortgage in Changing Economy

The COVID-19 pandemic and its far-ranging economic impact have left many families wondering what their next steps should be and how they should plan for the future. Changes in the market have resulted in lower interest rates.

With lower interest rates available, it's natural to wonder when to refinance your mortgage, because it could possibly lower your monthly payment. We've broken down the key considerations to help you determine the right steps for your financial situation.

Is refinancing the right decision for you?

Look at your current mortgage terms to determine what changes would be most beneficial.

  • Interest rate: How much would you be able to lower your interest rate by refinancing? You'll need enough of a reduction to cover the extra amount you'll pay to close this new loan. Even a small reduction of your rate can make a big difference in what you pay over time. Get an estimate with our refinancing calculator.
  • Monthly payment:Would a lower payment work better for you, even if it means paying off the loan over a longer period of time? If this is the case, you may want to refinance to a longer term.
  • Shorter term: Refinancing could mean changing the terms of your loan so that you can pay off what you owe faster. This means you could save by paying interest for a shorter period of time.
  • Equity: How much equity do you currently have in your home? You might be able to refinance your mortgage and turn your equity into cash, also known as a cash-out refinance.
  • Type of rate: One potential reason to refinance is if you're currently paying an adjustable rate and would prefer the security of a fixed-rate loan.

Evaluate where you stand on each of these factors. If one or more of them present a strong case for refinancing, it could be worth considering further.

How much will refinancing cost?

Refinancing may lower your monthly mortgage payment. However, there are costs associated with taking out the new loan that should be factored into your decision.

Closing costs are the first type of expense to consider. When you refinance, you'll still need to pay closing costs, such as application fees, appraisal fees and title insurance. Refinancing advertised as no-cost often adds these expenses into the principal of the new loan or charges you a higher interest rate.

The other main cost is additional interest. Although refinancing may result in a lower monthly payment, if you restart a 30-year loan or extend the term of your new loan, you may pay more interest over the life of the loan than you would by staying with your original mortgage.

Is refinancing possible in your area?

Government shut-downs and stay-at-home orders may increase the challenge for those wishing to refinance in the coming months. However, there are options available. You can research rates online and submit an application online. Title companies are also developing workarounds in some states to complete virtual closings.

If you think refinancing may be an option for you, talk to a mortgage banker and ask about the current refinancing rates and terms.


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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.