Timing refinance

You may have heard that you shouldn’t even consider refinance until the interest rate drops two percent. If you actually followed that antiquated maxim, you would probably miss out on considerable savings. The drop in interest rates need not be drastic for you to get the best mortgage rate.

Years ago, experts in fact endorsed the two-point rule. Their reasoning was sound at that time; previously, the upfront costs that refinancing required made the process more difficult and expensive. These upfront costs are no longer a given, meaning that the best mortgage rate might be more easily attained than you imagine.

In other words, even a slight drop in interest rates can be a good reason for a rate and term refinance.

That’s because a large number of lenders have made it possible to circumvent the upfront fees involved in refinance. Many borrowers have the option of forgoing the best mortgage rate for a slightly higher one, which allows upfront refinance costs to be altogether eliminated. Other borrowers might opt to tack on the refinance costs to the principal of their new mortgage. In both cases, savings are immediately experienced.

If you anticipate a move in the near future, you must make sure that you choose one of the above options. In that case, paying the refinance charges upfront will considerably lessen your savings.

Now it is common for borrowers to refinance their mortgage many times as they pay down the principal. Making sure that you have the best mortgage rate at all times will shorten your repayment time and save you money in the long run.