RefinancingAs interest rates continue to stay at historically low levels and house prices tend to surge in many markets, it’s not unusual for homeowners to consider a refinance. Especially if your credit score and debt-to-income ratio have significantly improved in the past years, your confidence must be skyrocketing to snag these tempting rates.

But much like other types of home loans, a refinance is not for everybody —  specifically, not for all situations. It might pay for your neighbor to get a fresh rate and term, but it wouldn’t necessarily make sense to you. If you’re seriously considering to refinance in Apple Valley or any other city, you might be better off to stick to your current loan when:

You Would Be Forced to Take an ARM for a Lower Rate

If you currently have a low fixed rate and the only way to bring it down is by switching into an adjustable-rate mortgage, then the odds are against you. You may profoundly drop your repayments with incredibly low ARM interest, but that is most likely going to increase, even higher than what you pay now, down the road.

An ARM lacks stability since the rates have been consistently low for the past years now, they’re bound to head north. The best possible practice is to refinance before the ARM resets, not to refinance to move into an ARM.

It Might Be Too Long for You to Break Even

The break-even period is the time it takes for you to recoup your new loan’s closing costs. Once you know how much exactly these costs are, calculate the amount of savings you would get every month with your new rate to see when you can truly save.

You would reach this period at some point, but the problem is when that stretch is longer than the period you plan to stay in the house. If you feel the period’s length is unacceptable, then a refinance might not work for you.

It Would Cost You More in the Long Run

When you refinance, a low monthly repayment is usually irrelevant if the term is too long. Especially if the difference between your new and old rate is almost insignificant, and your term doesn’t change, you might discover that you would pay more money over your new loan’s lifetime if you do the math.

Only you could tell if you really need a refinance. Your personal situation is the single most important factor in determining if this move is worth your while.