There are a lot of factors that can dictate when is a good time to buy, but the most important time is when it is right for you. Here are a few guidelines:
Checking off all these boxes could help you feel that the time is right to buy.
You could drive yourself crazy chasing the lowest rate – which actually may not be the best deal for you! There are also points, closing costs, and more you need to consider along with the rate.
Plus, trying to time it to get what you think is the absolute best rate could mean you end up missing out on a good deal or even not getting the house you wanted.
The best move is to get with a knowledgeable mortgage specialist. This expert can review your situation and help you find the right combination of rate, term, points, and fees so you can get the best deal that’s also best for you.
Once you’re ready to buy, you may want to consider targeting a specific time of year..
In winter, prices tend to be lower. But housing inventory could be lower as well.
Spring and early summer make up the high season. More homes are listed at this time (more inventory). Of course, people are more likely to get out and look at homes when the weather is nicer. As a result, prices tend to be higher. And there is more competition for the homes (which can lead to a bidding war).
Late summer may be one of the best times to look for a home. The early rush of spring is over and prices may start to drop. Plus, there is usually still a good number of homes on the market.
Fall could be a good time to buy as well. Housing inventory may be reduced. But those sellers that are left may be reducing prices on homes they first listed in the spring. So you potentially could get a deal.
There are a few reasons you might want to refinance your mortgage. You may be able to get to a shorter term so you could pay off your loan quicker. You may be able to refinance at a lower rate and reduce your monthly payments. Or you may be able to do a cash-out refinance to tap into the equity you have built up in your home to do home improvements, pay off high interest credit cards, and more.
A rate drop is the most common trigger for people to decide to refinance. A good rule of thumb is that rates need to drop 1% below your current rate. But in some cases, it may make sense to refinance even before that.. For example, maybe you have a higher credit score compared to when you first got your mortgage. Maybe you’ve improved your payment history as well. These are the types of factors that could qualify you for a lower rate.
No matter what your situation, there are a few things to know before making the decision.
Before you jump into refinancing, make sure you understand what you may have to pay. The costs could include:
It’s not unusual to spend anywhere from 2% to 5% of your loan amount on closing costs.
To decide whether or not it makes sense to refinance, you need to calculate how long it will take to recoup the refinance costs (this is called your break-even point).
To do this, calculate how much the refinance will save you each month. For this example, let’s say that a refinance will knock $150 off your monthly mortgage payment. And let’s say the refinance will cost you $3,000. You simply divide that $3,000 by the $150 monthly savings.
$3,000 ÷ $150 = 20
That means, under this scenario, it makes sense to refinance your home if you plan on staying there for another 20 months (1 year - 8 months).
If you’re thinking of moving within the next year because your family is growing or you’re getting ready to downsize, it may not be a good idea to refinance because you won’t recoup all the costs of that refinance.
You may have an adjustable rate mortgage (ARM). These typically offer a low interest rate for the first 1 - 5 years, then reset to wherever the rate is after that. And then adjust each year.
If you have an ARM that’s getting ready to reset, you may want to refinance to lock in a rate for the life of the loan and avoid any chance of any other increase in your interest rate (and your loan payment).
Before you make a decision, consider consulting with a mortgage specialist. As you can see, there are a lot of moving parts with a home purchase or refinance. This expert can run the numbers with you, and help you work through your unique situation. That way, you can feel confident that the time is right for you.