7 signs it's time to refinance

Sometimes in life, you just want a do-over. And that’s true even when it comes to your home mortgage. A few years into your 30-year commitment, and you’re itching to change the interest rate, term or size of your loan. If you’re feeling that way, you’re not alone: nearly half of all mortgages applied for today are actually "do-overs," or mortgage refinances, according to mortgage behemoth Freddie Mac. Here are seven signs you might want to refinance too:

1. You’re feeling rich.
House rich, that is. You want a wad of cash – for home improvements, college tuition, a trip around the world -- and your house has appreciated significantly since you bought it. Rather than taking out a separate loan, you could trade in your old mortgage for a bigger one, and pocket the difference. “Cashing out,” according to Freddie Mac®, has become the most common scenario among refinancers.

2. You’re feeling poor.
Again, your house has appreciated, but you have other existing debt that carries a higher interest rate than your mortgage. You can use the cash you get from refinancing to pay off that credit card.

3. You’re feeling cheated.
Why should you be paying 7percent on your loan when your new neighbors just locked in at 6? Visit the LendingTree refinance calculator to find out how much you could save by converting to a lower interest rate mortgage.

4. You’re feeling settled.
Even if you lower your interest rate and – by extension – your monthly payment, refinancing still might not make sense. That’s because there can be myriad fees associated with refinancing – application and appraisal fees, to name a few – and they can easily run into the four-figure range. You want to be reasonably sure that you’ll be in your house long enough to recoup those costs through monthly savings. Again, do the math, and see if you can negotiate with your lender to minimize those fees.

5. You’re feeling anxious.
Wringing your hands over your ARM (adjustable rate mortgage)? Stop fretting about potential interest rate increases and switch to a fixed-rate loan.

6. You’re feeling responsible.
Gold star for you! Through years of good financial behavior, you have put those earlier credit score dings behind you. If your credit score has improved significantly, you could refinance at a lower interest rate. Check your credit report, for free, once a year, at www.annualcreditreport.com.

7. You’re feeling squeezed.
You need to lower your monthly payment and are willing to go with a longer-term loan, extending it from 15 to 30 years or even 30 to 40 years. This could work in reverse too: you have some extra money in the monthly budget and want to go from a 30-year to a 15-year mortgage. Congratulations, Mr. Moneybags. You’ll likely get a lower interest rate and pay off your home mortgage faster. If only we all had this problem….


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