You’re thinking you could probably save money on your mortgage, and you’re wondering if now is a good time to refinance so you can get more favorable terms.
Well, here’s a spoiler: now might be exactly the right time for you to start shopping around for a loan to refinance your house. Here’s why.
Interest Rates Matter
As is ever the case when you’re shopping for any kind of loan product, interest rate trends are always an important consideration. Obviously, when interest rates are low, it’s a good time to refinance. When rates are high, you might consider waiting for a more favorable market to take the leap. However, it never hurts to shop around a bit, even when the market seems ‘unfavorable’.
Timing Matters, Too!
With lots of types of products, there’s a best time to buy in order to get the best price. For instance, you’ll often get a better price on popular toys after the winter holidays are over. Retailers want to sell those products to clear out shelf space and demand is much lower, so they let the toys go at a much lower profit margin than they do during the peak holiday toy-buying season.
Mortgages are no different, so if you’re looking to refinance, you’ll ideally want to stick to the times when banks and brokers are looking to ramp up their sales to make sure they earn the best possible bonuses.
Many banks have monthly quotas for sales or closings. Towards the beginning of the month, sales agents are likely taking it easy, recovering from the rush of the month before. Ipso facto, they’re less motivated to work to offer you the best possible terms.
Towards the end of the month, they start feeling the crunch. They’ve got a deadline, goals to meet, sales to make so they can make the boss man happy. They’re looking for ways to get you to say yes to their offer, digging for the terms that will get you to closing. On a month to month basis, the last two weeks of the month are the best refinance.
Quarterly goals are definitely a thing, too. Most financial institutions have quarterly sales goals, and just like their monthly goals, they’re more pressed to make sales at the end of the quarter.
Once again, there are goals to be met and bonuses to be earned. The end of the year is the best time to refinance a mortgage, say the last few months, since fourth-quarter sales tend to affect bonuses more than the first three.
It would be simplistic to say you should look to refinance your house at the end of the year. The truly relevant factor in aiming to refi at the end of the year isn’t the calendar year but the company’s fiscal year. Not all companies’ fiscal years stick to the calendar year. Fiscal years may end in any month, though the majority do mimic the actual calendar. If you’re shopping a particular bank, it might pay to check out when their fiscal year ends before you approach them about refinancing.
Regardless of when you decide to tackle that home refi, it’s important that you make a decision that will put you ahead within a few years. The general rule of thumb is that you shouldn’t refinance unless you can garner an interest rate at least 1% lower than your current rate, but if you’ll be able to break even within a couple of years and you’re not planning on moving any time soon, it might be worth bending that rule a bit.
Have you refinanced this season? Let us know in the comments below!