For most homeowners, mortgage payments make up a large expense on the list of financial responsibilities. In fact, a study released last year showed that nearly 40% of homeowners in San Diego spent 30% or more of their monthly income on housing costs. However, there’s some good news. Refinancing your mortgage could help make your monthly payments smaller. 

So, how do you decide if refinancing your mortgage is the right move for you? Here are 5 ways to know it’s time to refinance. 


1. Interest Rates Have Dropped Since You Got Your Mortgage 

One of the best reasons to refinance is to get a mortgage with a lower interest rate than your current loan. Most lenders say that even 1% savings are enough to show significant savings in your monthly payments. With interest rates recently dropping in the past year, it could be time to take advantage of this before rates begin to rise again. 


2. You Have an Increase in Home Equity 

With home values in San Diego increasing, you might have more equity in your home than you think. Additionally, if you’ve paid off enough of your mortgage to have a decent amount of equity, it could be time to refinance so you can tap into your equity for other financial costs.

For example, a cash-out refinance based on your home’s new higher value lets you “cash out” on your home’s equity. You can use the lump sum of money you get for various expenses, including college tuition, home improvement projects, and consolidating credit card debt. 


3. Your Credit Score Has Improved 

Your credit score directly impacts what mortgage rates you qualify for. Lenders rely on credit scores to determine if you are a risky borrower or not. People with higher credit scores are more likely to get better rates since it reassures lenders you will pay them back. If you’ve been working on improving your credit score and now have a better score than when you first took out a mortgage, it could be time to reap the benefits. 


4. You’re Planning to Move or Stay for a Few More Years

How long you plan to stay in your current home and what type of mortgage you have are factors to decide whether it’s a good time to refinance. For example, if you plan to move in a few years and have a longer-term fixed loan, you could save money refinancing to an adjustable-rate mortgage with lower interest rates. 

In contrast, suppose you plan to stay in your home for a while and currently have an adjustable-rate mortgage for a term of 5 years. Also, you’re about to reach the time where the adjustable-rate can move higher. In this case, you could benefit from changing to a fixed-rate mortgage where interests won’t fluctuate.


5. Calculating the Numbers Shows Savings

The best way to determine if refinancing is the right move for you is to run the numbers. Refinancing is worth the effort if the results show that you’ll free up money in your monthly budget or reduce the overall cost of your loan. Using information about what interest rate you qualify for, current loan options, and more, you can determine how much money you will save in the long run from a refinance.


You also don’t have to figure out these numbers alone! At the Zion Group, we work with numerous national and regional lending partners to ensure you can secure the best rate and loan structure for your refinance. Contact us today for more information on how we can help.

– The Zion Team

Phone: (858) 324-1951 | To schedule a meeting or call, click here.