How Often Should I Refinance My Mortgage?

August 17, 2017


Every four years? Whenever interest rates go down? Three times is a charm? How often should you refinance your mortgage to get the most out of your home loan?

How many times you should change loans depends on several factors. Some of these factors depend on you as a borrower while others depend on the market.

There is no optimal number of times to refinance during the course of a mortgage. Even without a magic number, there is a golden rule. You should refinance as many times as it benefits your circumstances. Many experts suggest doing a review of your loan to ensure it’s a good fit for your financial needs every year.

If your mortgage isn’t serving you and the benefits of switching will outweigh costs, you can change loans as many times as you want to. Depending on interest rates, how long it will take you to pay off your current balance, your goals, and your life stage, there are many times you will assess your mortgage and decide that keeping your current loan may be a smart decision.

Changing Interest Rates

When rates go down, more property owners head to the banks to refinance. There’s also more investment loans, new builds, and first-time homebuyers. The mortgage market picks up.

Naturally, if there are more periods where rates drop, especially early on in your mortgage, you are likely to refinance more frequently to take advantage of lower interest rates. Depending on how much you have left to pay on your mortgage, refinancing to even two or three-tenths of a percentage lower could save you thousands in interest and lower your monthly repayments.

Life Stage Refinancing

Over the course of your home loan, you may want to refinance to meet financial goals that relate to where you are in your life. Here are four common reasons to refinance based on your life stage.

  • As a young professional – once you start earning a higher income, you may want to refinance from a basic home loan to a full-featured variable home loan. With a free offset account and unlimited early repayments, you can pay down your mortgage faster.
  • Middle age – many homeowners refinance to access the equity they’ve built up in their home to meet other financial goals such as a home renovation, purchasing a new car, or consolidating debts.
  • Pre-retirement – this is when you may want to refinance to a line of credit loan. You’ll probably have a lot of your mortgage paid off and can use the equity to invest in a second property.
  • Retirement age – some borrowers opt for a reverse mortgage or a line of credit home loan to make it easier to access cash for retirement.

Should You Refinance Now?

Refinancing can cost anywhere from a few hundred to $3,000 or more. If you’ll save more than this amount with better loan features, a lower rate, or access to your equity, then it may be smart to refinance. Calculate how much it will cost you depending on the new loan products you are looking at and weigh those costs against the benefits. If you are in a position to gain, you may want to reach out to an online mortgage specialist or broker to help you shop around for your next mortgage.

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