When is the Best Time to Refinance Your Mortgage?


Current Rates Compared to Your Rate

There’s no need to refinance if your mortgage rate falls just a hair below current rates. In short, you won’t save enough money to make the effort and related costs worth it. A good rule of thumb is that if current rates are more than a half of a percent below your interest rate, connect with a loan provider to explore options. 

At NWOC, we are currently seeing rates around 3.2% for individuals with a good credit score.

Many families in Orange County are sitting with interest rates much higher than that. Prior to the housing market collapse, interest rates averaged around 6% and 7%. Individuals who stayed in their home with their original mortgage could save up to 3% or 4% if they take advantage of current low rates. 

That’s substantial savings.


Evaluating Benefits

As mentioned, refinancing doesn’t make sense for everyone. When you work with the NWOC Loan Department, our specialists will go through what we call a “Net Tangible Benefit.”

While it sounds complex, it really comes down to comparing the savings against the costs. Closing costs for a refinance average between 1%-2% of the total amount borrowed. We evaluate that against your monthly savings over the amount of time you plan to stay in the home. If the amount of savings pays off the refinance costs in a reasonable time, you’ll be recommended to refinance.

Each scenario is different, which is why a loan provider can help you determine your overall savings based on your loan amount and qualifying interest rate. For example, families thinking about moving in the next year will most likely not save more than the closing costs before they move. In that scenario, a refinance wouldn’t make sense.


Additional Considerations

There are other considerations that factor into a family’s decision to refinance. Some families use a refinancing as an opportunity to consolidate other high interest debt. Homes in neighborhoods with rising values can often times qualify for better terms. The homeowners have equity built into the home that gives them additional options. 

Inversely, there are things to be mindful of as well. Homeowners need to watch out for repayment penalties or loans with special features that might adjust the interest rate.


Partner With a Social Enterprise Model

At NWOC we are pioneering a new age in the nonprofit space and the mortgage industry through creating social enterprise arms of our organization. Both our real estate services and our lending department differ from the traditional commission based model. Instead, our team works on salaries provided by our nonprofit funding.

All commissions earned through services are reinvested back into our programs focused on sustainable homeownership and building community. You receive the best service, competitive rates, and help support important initiatives in your community.

We like to think of it as a home mortgage on a mission to do serious good. 

More importantly, our loan providers work to make sure that you are only pursuing options that are in your family’s best interest. The cornerstone of our organization hinges on helping individuals and families pursue sustainable housing options. We adamantly believe that this is a crucial component of building strong communities.

Connect with our loan department today to see if refinancing is right for you.