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For many, the goal of a mortgage refinance is to save money on monthly mortgage payments and interest rate. Other homeowners may choose to refinance their mortgage to shorten the repayment period. These financial goals can be achieved with the right timing, but everyone's case is different.

The right time to refinance your mortgage depends on a person's finances, current mortgage terms, national interest rates and the Federal Reserve's monetary policies. Homeowners should take into account their financial goals, needs, and projections before making the decision. 

Here are some helpful questions to get answers to when considering whether or not to refinance your mortgage.

Will a mortgage refinance lower my interest rate?

If you can lower the interest rates on your mortgage, you should strongly consider refinancing. It is far and away the most common reason for refinancing due to the money-saving potential. Specifically, homeowners will pay less interest over the life of the loan, and when you look at the numbers, you could save a lot!

Consider this - you have a 30-year fixed-rate loan of $300,000 with a 4.5 percent interest rate. You can expect to pay $246,783 in interest over the life of the loan. However, if you refinance, you can cut that figure dramatically. The same loan at a 3.0 percent interest rate would only pay $155,089 in interest. Even when you factor in what you have already paid, you will come out ahead.

Compare your current mortgage interest rate to what the current national interest rate is. If your mortgage interest rate is at least one percentage higher than the current national interest rate, it could be a good opportunity to refinance.

Use our free mortgage refinance calculator to see how your payments can change.

Can I shorten the repayment period?

While getting a lower interest rate is the most popular reason for a mortgage refinance, it isn't the only strategy for homeowners. Shortening the repayment period is a smart move that can pay dividends for your wallet.

Today, most homeowners hold a 30-year fixed-rate mortgage. They have monthly payments they can afford, payment flexibility, and stability against interest rate fluctuations. While the 30-year fixed-rate mortgage has marked benefits, it is also the most expensive option.

Changing to a 10, 15, or 20-year fixed-rate mortgage can significantly speed up the repayment process. For instance, moving from a 30-year to 15-year mortgage reduces expenses by 65 percent. This move makes sense if you are in a stronger financial position than when you first negotiated your mortgage. That way, you can start paying off the principal sooner, instead of dedicating monthly checks to interest rates.

Can I switch from an adjustable to a fixed-rate mortgage?

Adjustable-rate mortgages or ARMs have interest rates that change over time. That is less than ideal if you like predictability and plan to live in your home for the long term.

Fixed-rate mortgages are more straightforward. Their interest rate is the same on the first payment as it is on the last one. Put another way: your monthly principal payment will never change. Many homeowners opt to switch to a fixed-rate mortgage to simplify their budgeting and avoid interest rate increases.

What do refinancing calculators say?

Use United's free mortgage refinance calculator to see how refinancing can change your monthly payments and repayment term. Plug in your current interest rate and monthly mortgage payments. Then, insert the details for your new loan. Submit the information, and voila, you can instantly compare your existing and ideal mortgage. A United mortgage advisor can also help you determine these numbers when you make an appointment at your local branch.

Are there mortgage refinancing fees?

Typically, mortgage refinancing isn't free, and homeowners will pay closing costs. Depending on where you go, you can expect a couple of added expenses, such as an appraisal fee for estimating the market value of your home, a mortgage application fee, and an origination fee. Typically, refinancing costs about two to five percent of the loan's principal.

Homeowners that plan on staying in their homes long term can recoup the costs of refinancing. For others, paying the refinancing fees may not be worth it in the short term. 

What is the break-even point?

At a certain point, refinancing will pay for itself. That is the break-even point. To find your break-even point, divide the mortgage closing costs by the monthly savings from the new terms. For instance, if you pay $3,000 in closing costs and save $150 per month through refinancing, you will break even after 20 months.

What is my credit score?

It's important to consider what your current credit score is before applying for a mortgage refinance. Homeowners with high credit scores may be approved for lower interest rates, but having a lower credit score can lead to paying a higher interest rate. The higher the interest rate, the more you'll be paying for the term of the loan, so you'll want to make sure that your credit score is in good shape before deciding to do a mortgage refinance.

Homeowners can use a loan savings calculator to discover their possible interest rate based on their credit score.

Refinancing will also lower your credit score, so make sure your credit is rock solid beforehand. Lenders will perform hard inquiries to see your financial history. This results in a temporary credit score drop that becomes larger the more lenders you contact. While the dip is not ideal, it is necessary to secure the best interest rates possible for your refinanced mortgage.

Mortgage refinancing is not a one-size-fits-all solution

Even if interest rates drop, it may not be the best time to refinance your existing mortgage. Refinancing a mortgage can be a savvy financial decision if it shortens loan durations, reduces payments, or helps build equity faster, but homeowners should look at their financial situation and decide for themselves if the outcome aligns with their financial goals.

Have questions? Find your local United mortgage advisor for personalized help with a local expert.