Have questions about when to refinance your home loan? It’s a good idea to check in with your loan officer after major life changes, like starting a family, retiring, divorcing, or taking on new debt. An annual mortgage review ensures your mortgage still fits your life. It can also tell you if you’d benefit from refinancing to shorten your loan term, access equity, or qualify for a better interest rate.
Your mortgage was set up for who you were when you bought your home—not necessarily who you are today. To put it another way, your mortgage usually doesn’t get better with age.
Is It Time to Refinance Your Home Loan?
Refinancing is using a new home loan to replace and pay off your current mortgage. When rates go down, refinancing numbers typically go up. Even if you already have a historically low rate, there are still reasons to consider reviewing and possibly refinancing your mortgage. These include life changes like having a baby, changing careers, sending kids to college, entering retirement, and having an aging parent move in.
Any of these life events can dramatically alter your financial picture. Yet it’s common practice to treat a mortgage like something you “set and forget.”
Getting a mortgage review doesn’t always mean that you’ll refinance your home loan. During a review, your loan officer will examine:
- Your current loan terms and interest rate
- Your home’s current market value
- Your financial situation and goals
- Market conditions and available options
This review can result in several different recommendations:
- Maintain your current mortgage if it’s already optimal for your situation
- Make extra principal payments without refinancing
- Consider refinancing your home loan if it offers clear benefits
- Explore other financial strategies that better align with your goals
Even if refinancing isn’t recommended, an annual mortgage review provides valuable peace of mind that your largest financial commitment has been professionally evaluated. It’s similar to your yearly wellness exam.
Got a minute? Schedule your complimentary check-in.
5 Possible Outcomes of an Annual Mortgage Review
Depending on your circumstances, there are several opportunities a mortgage check-in could uncover:
1. Lower your monthly payment
Refinancing can be used to lower your interest rate and your monthly payment. Even a modest interest rate reduction could translate to significant savings over time. This frees up extra funds that can go toward day-to-day expenses or be redirected to savings, retirement, or renovations.
2. Pay off your mortgage sooner
Deciding to refinance from a 30-year to a 15-year loan could shorten your path to financial freedom. Though your monthly payment will increase when decreasing your loan term, it could be worth the long-term benefits. You’ll have the potential to save thousands in interest while building equity faster.
3. Simplify your finances
Leveraging your home equity through a cash-out refinance can help pay off high-interest debts like credit cards and personal loans. If this approach is right for you, it can streamline your finances by replacing multiple payments with one monthly mortgage payment—often at a lower interest rate.
4. Remove a co-borrower
Life changes like divorce often require adjusting your mortgage to reflect new circumstances. Removing a co-borrower through refinancing creates a clean financial break while securing you as the homeowner. This process also lets you select loan terms that better match your individual financial situation.
5. Access your home’s equity
With home values continuing to rise in many areas, you’ve probably gained home equity. Many homeowners use a cash-out refinance to leverage equity and fund life expenses, like education, medical bills, home improvements, debt consolidation, starting a small business, or purchasing an investment property.
The latest Profile of Home Buyers and Sellers shows that homeowners continue to stay in their homes for 10 years on average. Since the Great Recession, this has become more common. If you’re not ready to make a move, you could still see benefits by checking in and fine-tuning your mortgage.
Has Your Life Outgrown Your Mortgage?
There’s an easy way to find out. Get in touch to schedule your complimentary mortgage review.
Sources deemed reliable but not guaranteed. While refinancing could make a significant difference in the amount you pay each month, there are other costs you should consider (such as finance charges over the life of the loan). In Santa Barbara, refinancing a mortgage is similar to when you initially applied for your loan. You must have a relatively good credit score, pay closing costs and fees, and may even have a cursory home inspection.