When Is a Good Time to Refinance My Loan?

Updated on July 31, 2019
Nate Robbins profile image

Nate is a Mortgage Loan Officer for a local bank with a degree in Finance, helping individuals make that big ticket purchase.

What is Refinancing and Why Do People Do It?

Refinancing is taking out a new loan with new terms to replace an old loan. You must go through a process similar to the one you went through when you took out the old loan, though it may be more streamlined.

Why Do People Refinance?

People refinance for many different reasons, four big ones being:

1. Interest rates have gone down and they want to take advantage of the lower rate

2. Their credit score has improved, therefore they will be able to receive cheaper financing

3. They want to reduce their monthly payment by extending the life of their loan

4. They want to renegotiate the terms and conditions of their loan

When you refinance, you have the opportunity to do each of the above in order to put you in a stronger financial position.

Should I Refinance?

This is really up to you and your unique financial position to determine if refinancing is the right thing for you. However, some good indicators that it may be a good time are:

1. Interest rates are lower than when you initially took out the loan

2. You've had your loan for a while and you want to extend the loan to reduce the monthly payments

3. Your credit has vastly improved since you took out the loan

4. Your current loan is an ARM and you want a fixed rate

5. Your loan has a balloon feature and is near the term's end

Understanding what type of loan you have and the rates on your current loan are very important. Many people end up in financial ruts because they didn't understand the terms of their loan or they don't know whether their interest rate was high or low.

What Happens When I Refinance?

When you refinance a loan, you are essentially paying off an old loan by taking out a new loan and assuming the terms of the new loan. When refinancing you are free to shop around; you don’t have to refinance with your current lender. Note that if your servicer changes, you will make your payments through your new servicer not the old. Refinancing will typically cost you a little money up front in fees so be prepared to have money to give to the lender if you choose to refinance.

Refinancing is a great tool to help individuals save money and achieve their unique financial goals. Many people take out their loan, make their payments, and forget about it. Understanding your refinancing options and current terms will help you decide if you currently have a strong rate and whether refinancing is something you should consider. If you have taken a loan out recently, rates have been so low that you most likely got a great Interest rate. However, understanding your finances and options is always important.

Questions & Answers

    © 2019 Nate Robbins


      0 of 8192 characters used
      Post Comment

      No comments yet.


      This website uses cookies

      As a user in the EEA, your approval is needed on a few things. To provide a better website experience, toughnickel.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

      For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://toughnickel.com/privacy-policy#gdpr

      Show Details
      HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
      LoginThis is necessary to sign in to the HubPages Service.
      Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
      AkismetThis is used to detect comment spam. (Privacy Policy)
      HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
      HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
      Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
      CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
      Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
      Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
      Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
      Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
      Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
      Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
      VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
      PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
      Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
      MavenThis supports the Maven widget and search functionality. (Privacy Policy)
      Google AdSenseThis is an ad network. (Privacy Policy)
      Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
      Index ExchangeThis is an ad network. (Privacy Policy)
      SovrnThis is an ad network. (Privacy Policy)
      Facebook AdsThis is an ad network. (Privacy Policy)
      Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
      AppNexusThis is an ad network. (Privacy Policy)
      OpenxThis is an ad network. (Privacy Policy)
      Rubicon ProjectThis is an ad network. (Privacy Policy)
      TripleLiftThis is an ad network. (Privacy Policy)
      Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
      Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
      Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
      Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
      ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
      Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
      ClickscoThis is a data management platform studying reader behavior (Privacy Policy)