When asking “should I refinance my home now?” you may be referring to the time of year, state of the economy, or just the current rates. We want to cover the question “should I refinance my home now?” with an exploration of timing as it relates to the economy and as it relates to the time of year.
Should I Refinance My Home Now: Time of Year
Theoretically the seasons of the year should have very little or nothing to do with home prices and the home mortgage refinance process. Home prices are based on a variety of economic factors within the broad economy and the economy closer to where you live, as well as factors related to geography, features, and the immediate area. But in actuality, home prices do vary a little by season, and this usually has to do with inventory and need – the classic supply and demand. And this may affect your comps when you are wondering when to refinance your mortgage. Some examples:
1. More people, especially families, want to buy a new home in the spring when kids can naturally transition to a new school system the following fall, and when it is generally easier to move. In the winter, especially of course in cold states, it is harder to get a good feel for a home, especially the grounds, so many people wait until spring for that reason. One way or another, there are fewer buyers in the winter and this means that sellers often have to go with slightly lower prices. With fewer buyers in the winter but still a good number of people who want to sell, inventory can be quite a bit larger than demand. These lower prices can affect comps when you go to refinance your home mortgage.
2. Homes that have features that are more attractive in certain months will sell for more as those seasons approach. A water feature, such as a home near or on a lake, will be more attractive as spring and summer approach, so the owner may be able to get a little more then. A home near skiing or with a home ice skating rink may go for more in the fall as winter approaches. If there are many homes selling with these types of features in your area, you may wonder whether to refinance your home mortgage in more optimal times.
3. Sellers who put their home up for sale in the spring for reasons above, and those who worry about the slower home selling time in the winter, may lower prices if their home is still on the market in the fall. Even if they don’t lower the price, the longer the home has been listed the more likely the seller might be to take a lower price. Again, this may affect comps and therefore the home mortgage refinance process.
Bottom line: The answer to the question “Should I refinance my home now?” as it relates to the seasons is that there may be times where your comps will be highest, and that may be somewhat seasonal.
Should I Refinance My Home Now: Days of the Week
So you’ve affirmatively answered the first question we set out to help with, “should I refinance my mortgage now?” Now it’s a question of when you should do it – what is the best time to refinance. Of course the simple answer is when rates are lowest. That is your obvious best bet as far as when to refinance. But let’s say you want to go beyond that and wonder which day you should call and lock. There actually could be a difference, because:
Economic news comes on certain days of the week, so if you want to be conservative and not miss an opportunity to lock in at a current low rate, do not wait until economic news might shake things up. Look at the weekly calendar for the upcoming week or two, and note when news is supposed to come out. Know when to refinance your mortgage in order to avoid sudden swings – or perhaps even wait if you want to chance things that the news could have a positive effect.
You also want to catch a mortgage broker when she or he is not incredibly busy in order to be sure they lock your rate in time and follow through with your application quickly. Of course this factor is down the list, but everything else being equal and you want to know when to refinance based on mortgage broker availability, consider that they often come in on Monday with a ton to follow-up on, and they may also be busy at the end of the week to get everything done. And strange as it may seem, because it contradicts the above, you may want to avoid those times when many people will be calling for the reasons above – when economic news comes out or is about to come out. So the answer to the question “should I refinance my home now?” as it relates to the the day of the week may involve looking into when certain economic news is coming out.
Should I Refinance My Home Now: Economy
It seemed strange that mortgage interest rates were actually falling recently, even if not much, given that the long-term outlook for the economy was improved and the Fed was hinting at slowing its rate of buying bonds at deflated rates. But as we’ve said many times, home mortgage interest rates can react to shorter-term fluctuation in the bond market, which in turn can react to shorter-term economic indicators. This is what makes knowing when to refinance your home mortgage so tricky – getting the lowest rate on your refinance is not as easy as looking at the obvious stuff.
A couple of years ago economic indicators for the short to medium term were not as string as they had been, with a stock market, for example, that opened the new calendar year luke-warm. This after a banner year for the stock market. This did not mean that economists were suddenly forecasting a dramatic dip in the economy, but rather that the recovery may be slower than originally anticipated and that there may be slow patches on the way. Now alone this might not affect home mortgage interest rates too much, but in combination with the fact that perhaps they had risen too much in the early winter because of increased optimism, we saw rates fall a little.
What does all of this mean for the person looking for the lowest interest rate possible for their home mortgage refinance? It’s actually hard to say. Forecasting the longer term economic future may be much easier than the shorter-term, so trying to effectively time the mortgage interest rate market may be very difficult. But a quick dip may be worth waiting out if you feel like it was due to something situational. But as always, more people lose out by waiting than by getting the best mortgage interest rate they can. Long story short, the answer to “should I refinance my home now?” may require a little expertise in how various economic indicators affect rates.
Should I Refinance My Home Now: Conclusions
The short answer to the question is what the best time of year, what day of the week, or what economic factors are happening for the lowest mortgage rates is that there just simply is no huge immediate and predictable effect. Mortgage rates are dependent on many factors, none of them particularly predictable ahead of time. So overall we would certainly not suggest that you either put off a good rate lock because it’s not the right time of year or right day or you are waiting for certain news, or be more certain that a rate is favorable at another time of year or another day or when some sort of news comes out.
All of this said, there are a few factors related to mortgage refinancing that are related to these factors but may not directly relate to rates. The best example is that home buying in most parts of the country is seasonal, whether it’s because families like to move into new homes so that their kids can start in a new school at the beginning of the tear, because looking for homes is much easier to do when it is relatively warm, or because the entire moving process is just easier in the warmer months. So this means that with something like mortgages, where the products are all fairly similar – rates tend to be fairly similar between different lenders – there needs to be another way for banks and brokers to compete. In the off-season or slow season, there is likely less incentive for brokers and banks to put a lot of effort into marketing a great financial incentive to choose them. But in the season when everyone is competing for customers, incentives in the form of reduced origination and other broker and bank fees tend to blossom. Interestingly, however, none of the above creates a certain rule. And even when brokers and banks are not actively advertising a better mortgage refinance fee they still want your business. In fact in some ways they want it even more in the slow season when brokers are looking for commissions and banks are looking for fees that may be scarce. So while at these times there may not be a lot of effort being put into advertising low fees, you may be able to talk your way into some!
Usually the answer to our core question has to do with what rates are and whether they’ve dropped enough to make it worthwhile to refinance, but as you can see there are other factors that may provide a guide to help you answer the question, “Should I refinance my home now?”