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8 Reasons You Should -- and Shouldn't -- Refinance Before 2022 Ends

By Maurie Backman - Oct 21, 2022 at 10:10AM
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8 Reasons You Should -- and Shouldn't -- Refinance Before 2022 Ends

It's a tricky time to refinance

Refinancing a mortgage is a great way to save money on your housing costs. But it's important to refinance at the right time. With that in mind, here are some reasons you should and shouldn't move forward with a refinance in the next couple of months.

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1. You should refinance if you want to take advantage of higher home equity levels

Right now, home values are up across the board. And that means you may be sitting on more equity than usual. If you need a pile of money, a cash-out refinance could be a good way to get it. But if you wait too long, your home value might drop, leaving you less flexibility on the cash-out-refinance front.

ALSO READ: What Is a Cash-Out Refinance and How Does It Work?

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2. You should refinance if you need to consolidate even costlier debt

Refinance rates are high. But if you owe money on a credit card, the interest rate on your debt may be even higher. And so it could pay to do a cash-out refinance and use that extra money to pay off your credit cards.

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3. You should refinance if you can somehow lower your mortgage's interest rate

Mortgage rates are higher now than they've been in a long time. But it may be that the interest rate on your current mortgage is even higher. If today's rates are lower than what you're paying, a refinance could make sense.

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4. You shouldn't refinance because interest rates are super high

While refinancing could make sense for some borrowers in the next few months, you should know that borrowing rates are quite high. And so you may not reap a whole lot of savings if you go the refinancing route. Plus, you'll have to pay closing costs on your new loan.

ALSO READ: Closing Costs for Refinancing: Here's What You Need to Know

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5. You shouldn't refinance if you don't have a pressing need to take money out of your home

It's one thing to do a cash-out refinance because you need money right away. But if you don't have that need, then now's not a great time to do a traditional refinance. You're likely to get stuck with an interest rate you aren't thrilled with.

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6. You shouldn't refinance if your credit score needs work

The higher your credit score, the lower the rate you're likely to snag on a mortgage refinance -- or any loan, for that matter. But if your credit score isn't so great, you should probably wait on refinancing. You may get stuck with an even higher mortgage rate due to coming off as a risky borrower.

ALSO READ: 4 Credit Card Habits That Will Ruin Your Credit Score

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7. You shouldn't refinance if you might move in the near term

When you refinance a mortgage, you pay closing costs to finalize that loan. Those fees could equal up to 5% of your loan amount. It's important to stay in your home long enough to recoup those costs. But if you plan to move soon, that may not happen.

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8. You shouldn't refinance if your current mortgage rate is fairly low

Mortgage rates have gone way up since the start of the year. So if the interest rate on your existing loan is fairly low, you may want to keep your current mortgage -- even if you're interested in taking cash out of your home. In that situation, you could always look at other borrowing options, like a home equity loan or home equity line of credit (HELOC).

ALSO READ: Best HELOC Lenders of October 2022

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Make the right call

For most borrowers, refinancing probably won't make sense over the next two months. But that doesn't mean there aren't exceptions. Ultimately, you'll need to evaluate your personal circumstances when deciding whether it pays to refinance before 2022 wraps up.

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