Should I Wait To Refinance?
BY JOSH CASH | 2 MIN READ
There are several reasons why waiting to refinance (refi) your mortgage might not be the best strategy, even if you’re hoping for lower interest rates in the future:
- Rates May Not Drop Further
Interest rates are unpredictable and could rise instead of falling. If you wait for rates to drop, you might miss out on current rates, which could be lower than future ones.
Trying to “time the market” for a perfect rate could result in missed savings that you could have locked in sooner.
- You Can Refinance Again Later
Refinancing doesn’t have to be a one-time decision. If rates fall significantly after you’ve refinanced, you can always refinance again. This is particularly useful if you’re in a high-rate environment now, as refinancing now can lower your payments in the short term, and you can refi again if rates drop further.
The key is weighing the cost of refinancing against potential savings.
- Potential Immediate Savings
By refinancing now, you could start saving money right away, even if the rate isn’t as low as you’d like. Waiting too long could mean continuing to pay more in interest and monthly payments than necessary.
The earlier you lock in a lower rate, the sooner you can apply savings toward other financial goals, such as paying off the mortgage faster or investing.
- Home Values Can Fluctuate
Home values can change over time due to market conditions. If your home’s value decreases, it may affect your ability to refinance, especially if you end up with less equity in the home.
Refinancing when your home has significant equity can secure better terms and lower rates, especially if you avoid private mortgage insurance (PMI).
- Inflation and Economic Factors
If inflation or other economic changes occur, rates could rise quickly. Refinancing sooner locks in current rates before potential inflation or economic instability drives them higher.
- You Could Benefit from Other Loan Terms
Refinancing isn’t just about the interest rate. You might benefit from switching loan types (e.g., moving from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage), shortening the term of your loan, or consolidating debt.
- Improved Credit or Financial Standing
If your credit score or financial situation has improved since you got your current mortgage, you may qualify for a better rate or loan terms now. Waiting longer might not improve your situation further, so refinancing sooner could lock in better terms based on your current standing.
Conclusion:
While it may be tempting to wait for rates to drop further, refinancing now provides immediate savings, safeguards against rate hikes, and allows flexibility to refinance again if rates do fall later. Evaluating your current financial situation and the potential benefits of refinancing now may outweigh the risks of waiting for rates that may never arrive.
