How to Know if it is a Good Time for You and Your Spouse To Refinance

Emily Burton

Purchasing a home is no small feat. It takes a lot of time, hard work and strategizing to determine when is the best time for you and your spouse to buy. If you have been living in your home for a while, chances are you are now exploring the option of refinancing. This can be a great option for lowering your monthly mortgage and saving on the overall interest owed on your home. But how do you know when the time is right to refinance your house? Read on to learn some factors you should take into account when considering refinancing.

Mortgage Rates

One of the most important elements to investigate when refinancing is home mortgage rates. With refinancing, the goal is to get a new home loan at a lower interest rate, thereby saving you money on the overall cost. Therefore, it is important to research what types of rates are available. If the lowest interest rate you can find is the same as your current rate or higher, refinancing would not be beneficial. However, if you are finding rates that are lower than your current rate, it may be a good time to see if you can get a new loan at a better rate.

Income

Another key piece to factor in is you and your spouse’s income. If you have had an increase in salary since you purchased your home, now could be a great time to refinance. However, if you or your spouse just lost your job or took a major pay cut, now might not be the best time. While it is true that your monthly mortgage should be lower after refinancing, and therefore you would not need as much income, companies still evaluate your salaries to determine whether or not they want to approve you for the loan. So while a decreased salary does not necessarily mean you should not apply, keep this factor in mind while going through the process.

Additionally, lenders will oftentimes want to see your work history. They want to know you have a consistent income in order to pay off the debt. If you have bounced around between multiple jobs the past few years, it might be better to build rapport with a single job before applying.

Debt

Another primary factor lenders will review is your debt. Before you get that loan application underway, consider your current debt-to-income ratio. Have you acquired numerous new debts recently? If so, it is best to try and bring those debts down first if they nearly outweigh your income.

Credit

If you have bad credit, now is not the best time to refinance your home. Lenders will run a credit check and if they see you or your spouse have a low credit score, they might not approve you or approve you at a higher interest rate. Work on building your credit before refinancing. Different websites give you the option of tracking your credit score online so you can keep an eye on any fluctuations.

Property Value

The value of your property also plays a role in refinancing. If the value of your home has increased since you purchased it, now may be a good time to move forward. Keep in mind, many factors play into your house's value. Any significant damages or upgrades will count towards the overall price. Additionally, your neighborhood will also contribute to the value of your house. Do you live in a town that is thriving, with new businesses, schools and homes being built? This will increase the worth. Are people moving out of town at a fast pace, with businesses constantly closing their doors? If so, unfortunately this will likely decrease the property value.

There are many details to analyze when considering refinancing your home. Take time to review the above list. If many of these factors are leaning in your favor, now might be the time to make your move!

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