According to a 2023 report by US News, 84% of recent homebuyers are considering refinancing their homes at some point in the future. Even with such strong interest, however, the decision will not be made lightly. While the potential benefits are well-known, including reduced monthly payments and freed-up equity for high-cost projects, it is the “when” that makes some homeowners hesitate, leading to missed opportunities.
Below, Brian Jahanbin, who is the founder of Maxim Lending, Corp and has been ranked in America’s top 1% originators, offers 7 tips for determining the right time to refinance a mortgage.
1. Carefully evaluate current interest rates
Without a doubt, a lower interest rate factors heavily into a homeowner’s decision to refinance. “It’s important to remember, however, that they fluctuate daily and are affected by events and trends around the country and even elsewhere,” says Brian Jahanbin. “What that ultimately means is that if you see that rates have dropped significantly since you obtained your original mortgage, it could be a good idea to refinance, but you must remember to act as quickly as you can to lock them in.”
2. Honestly assess all financial goals
To benefit the most from refinancing, homeowners should take some time to clarify their financial priorities and long-term goals. They might like to reduce their monthly payments, pay off their mortgage sooner, or use their home’s equity to invest elsewhere. By focusing on what comes after refinancing, individuals will position themselves to make wiser decisions about the new terms.
3. Calculate potential savings
Maxim Lending, Corp offers an online calculator that can help homeowners estimate their potential savings from refinancing. “It’s a good place to start because it calculates your monthly payments, net interest savings, and, importantly, the number of months it will take to break even on the closing costs,” Brian Jahanbin explains. “They can be significant, as they might include appraisal fees, loan origination fees, and title insurance. Also, don’t forget to consider prepayment penalties, which some mortgages impose if you pay the loan off early. Knowing these extra details can help you to make the right decision for yourself.”
4. Consider the type of the current loan and its terms
This is where it is very useful to understand the fine print of your mortgage. If, for example, the person has an adjustable-rate mortgage (ARM), then by refinancing to a fixed-rate mortgage, they may be able to have more stability and protection against interest rate hikes in the future. On the other hand, if they have a fixed-rate mortgage, they may still reap benefits by refinancing to another fixed-rate loan or an ARM if rates drop.
Also, the homeowner should look closely at their mortgage’s terms, which can be adjusted through refinancing. What they choose to do will likely be influenced by their financial circumstances. Shorter loan terms have the benefit of paying off a mortgage faster, which decreases how much interest that the person will pay. Conversely, by extending the term, they may enjoy lower monthly payments but generate more interest overall.
If a homeowner is unsure about the terms of their mortgage or what to consider, they are invited to reach out to Maxim Lending, Corp for assistance.
5. Assess credit scores and take steps to improve them
If a homeowner has a low credit score, it may be wise to work on raising it before they apply for refinancing. “That’s because credit scores have a large impact on the interest rate you receive,” says Brian Jahanbin. “So, before heading to your lender, check out your score for free with each of the three credit-reporting bureaus. Pay down any credit cards and other debts, and if you see errors on your report, resolve them as soon as possible. Taking these steps can raise your credit score, which in turn will help you to get better refinancing terms and lower interest rates.”
6. Evaluate the equity in the home
Generally speaking, lenders will require that an individual have at least 20% of equity in their home in order to refinance. Crucially, if the value of their home has increased significantly since they first obtained your mortgage, they may be able to tap into that equity through refinancing.
7. Consult with mortgage professionals
Homeowners who want expert advice on refinancing their mortgages are invited to reach out to Maxim Lending, Corp. “Our industry is full of a lot of jargon and terms that can be difficult to navigate sometimes, and we can help you to understand it all plus explore all the options that you have,” says Brian Jahanbin. “We will help you ‘game out’ each possibility so that you can see all of the pros and cons and zero in on what’s right for you. Refinancing is all about making an informed decision, and we are happy to be a resource for all homeowners.”
About Maxim Lending, Corp
Maxim Lending, Corp was founded by Brian Jahanbin and is a full-service brokerage firm that treats every customer as an individual, not a number. It assists loan applicants nationwide, is licensed in multiple states, and offers conventional, FHA, VA, jumbo, hard money, and NQM loans. Brian Jahanbin is highly regarded in the mortgage industry, as he has closed over $1B in transactions. For more information, please visit Maxim Lending, Corp’s website.
