Refinance FAQ

There are a number of possible refinance FAQs (frequently asked questions) but the only one that is actually asked with any frequency is the one “Why and when should I refinance” to which there are three answers. So instead of a refinance FAQ this is rather a refinance FGA (frequently given answer).

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1) When interest rates have fallen. If you have a fixed rate mortgage and interest rates fall then you may be able to save money by refinancing your mortgage. If they fall just a little, then you won’t, because of the fees you have to pay to actually refinance. If they fall a lot you can save substantial sums.

2) When you credit rating improves. Imagine that you had bought a house when you had bad credit, or anything less than perfect credit in fact. This would be reflected in the interest rate you are paying on your mortgage loan. A few years later your credit rating may well have improved (if you’ve been making your payments on time it will almost certainly have improved) so you might be able to save money with a home mortgage refinance again. Market interest rates haven’t changed but your situation has, so you should get a better rate.

3) When you want a cash out refinance. House prices have gone up so much in markets like California in recent years that someone who bought a $200,000 house ten years ago might have $400,000 of equity in it. It’s great making that money but when it comes to spending it taking the back porch down to the store doesn’t work. So you can refinance and take cash out of the value of the house.