Rule of Thumb: When Is It Time to Refinance?

• June 13th 2011

by UrbanTurf Staff

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As long-term interest rates continue to drop, home owners with higher rates are seizing the opportunity to refinance their home.

But when does a homeowner know that it is the right time to refinance? An UrbanTurf reader recently wrote in with the following question:

“When should you start thinking about refinancing? Say, for instance, you have a 30-year loan at 5 percent. Is there conventional wisdom or a good refinancing calculator out there that says ‘if you can refinance at X.X% with $$$ of closing costs and X number of years left on the loan’, then you should do it?”

BB&T mortgage loan officer Matthew Rexrode offered up the following:

“A good measuring stick for when to refinance is to wait until rates are about 1 percent lower than your current rate. This can vary depending on your loan amount, though. If the balance on your loan is $150,000 or less, you probably want to wait until rates are a little more than 1 percent lower. If your loan balance is over $400,000, though, it’s worth looking into refinancing when rates are around 0.75 percent lower than your current rate.”

As for online calculators, Rexrode said that he uses the one on HomesLoanSocial.com, noting that it can give you a good sense as to when it is time to reach out to a loan professional to go over your options.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/rule_of_thumb_when_it_is_time_to_refinance/3649.