Let’s chat about the ideal time to refinance your mortgage. If you play your cards right, you could land a lower mortgage rate and save some cash. The last two weeks of the month are usually the best time to refinance. If you’re looking at quarterly periods, aim for the last month of the quarter: March, June, September, or December.
The best time of the year to refinance is when rates are dropping and lenders are eager for business. After 11 Fed Rate hikes since the first quarter of 2022, mortgage rates are finally on the decline. You might even consider paying down some extra principal to qualify for a refinance once rates drop further.
I’ve noticed some similarities between car buying and mortgage borrowing. Timing is crucial if you want to save money. I’ve refinanced my primary mortgage five times and my rental properties ten times in the past decade. Each time, I’ve become better at negotiating and understanding the best times to refinance.
I’ve built relationships with five mortgage loan officers from traditional banks like Citibank, Bank of America, and Chase. They’ve all shared their motivations with me, which are pretty much the same across the board.
Here’s what I’ve learned: Loan officers always recommend refinancing because they earn more from transaction volume. If you haven’t checked rates in the last 6-12 months, you might be pleasantly surprised. You could potentially get a similar mortgage at least 0.375% lower than your current rate.
However, I only suggest refinancing if you can secure a similar mortgage at least 0.375% lower and break even within 24 months. If you can do this, it’s a no-brainer to refinance now.
When deciding the best time to refinance, always calculate your break-even point. If you can break even within 36 months and plan on staying in the house for another five years, it’s worth considering.
The best time of the month to refinance is the last two weeks, and the best time of the quarter is the last month. This is when loan officers are trying to hit their targets and are more likely to negotiate.
The best time of the year to refinance is the fourth quarter: October, November, December. This is when loan officers are trying to close out the year strong and secure a good bonus.
Banks work on spreads. If they can pay 1.5% for $1 million in capital and lend out at 3%, they make $15,000 a year, provided you pay back the loan. Loan officers have some flexibility in how much spread they want to make off your loan. When they’re trying to hit their quotas, they’ll give you more wiggle room by narrowing their spread or providing more credits.
According to economist Odeta Kushi, if the spread between Treasury yields and mortgage rates returns to historic norms, there may be some downward pressure on mortgage rates. However, it’s unlikely that the spread will return to its historical average of 170 basis points, as some risks are here to stay.
Now that you understand how mortgage loan officers are incentivized, you can use this knowledge to get the best rate possible. Check the latest mortgage rates online and get quotes from pre-vetted, qualified lenders. The more quotes you can get, the better.
Given that interest rates have come down, the value of rental income has gone up. Real estate is my favorite asset class to build wealth. Record-low mortgage rates and positive home buying demographics are going to fuel the real estate market for the next decade.
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