Thinking of Refinancing in 2020? It Pays to Start the Process Immediately

Here's why it pays to get moving on your mortgage refinance today.

Refinancing your home loan is a good way to lower your monthly housing payments, save on mortgage interest, and get out of debt earlier. And with mortgage rates dropping to record lows for new home purchases as well as refinances, now's a great time to swap your existing home loan for a new one.

But if you're thinking of waiting to refinance in anticipation of mortgages rates falling even lower, you may want to reconsider. Come December, refinancing a home loan could get a lot more expensive, so you're better off completing the process before then.

Why refinancing is about to get costlier

Earlier in the year, government-sponsored entities Fannie Mae and Freddie Mac dropped a bombshell: a new 0.5% refinancing fee. That fee was initially supposed to kick off in September, but a strong reaction on the part of the housing industry prompted Fannie and Freddie to delay it until the start of December. With that fee set to take effect on Dec. 1, now's the time to get moving on your refinance applications.

Even if you begin the refinancing process prior to December, you may not get out of that fee if your loan doesn't close before then. And since it can take up to 60 days to complete a mortgage refinance, the sooner you get moving, the more likely you are to avoid paying extra.

Should you refinance your mortgage today?

Refinancing makes a lot of sense if you plan to stay in your home long enough to reap some savings after accounting for closing costs on your new loan. All loans come with up-front charges like recording and loan origination fees that can eat away at your savings, but if you have no plans to move in the near term, there's a good chance you'll save money by refinancing, especially if you're able to lower your mortgage interest rate by roughly 1% or more.

Refinancing also makes sense if you're having a hard time keeping up with your mortgage payments but want to stay in your home. And generally, you can roll your closing costs into your mortgage so that if money is tight right now, you don't have to worry about coming up with a lump sum in the near term.

If you're going to refinance, it pays to do so quickly, especially since it can take time to find a lender. It's smart to shop around when you're refinancing a home loan, because you may find that one mortgage lender offers you a better interest rate than another. But to be clear, the interest rate is only one factor that should go into choosing a lender. You'll also want to look at closing costs, as well as your lender's estimated turnaround time for getting your loan completed. If you find a lender who tells you your loan can close in 30 days, that's preferable to a loan that won't close for 45 to 60 days -- by then, you could run into the new refinancing fee.

Will the refinancing fee be delayed again?

There's still a chance that the 0.5% refinancing fee could be pushed back even more, especially if the housing industry continues to make a stink about it. But right now, we can't count on that happening, so if you're interested in refinancing your mortgage, your best bet is to start the process immediately.