What type of mortgage you are currently in is one of the many indicators as to whether or not you should refinance, and when you should do it.
If you are in a 30 year fixed rate loan below or at 5%, you may want to think twice about trying to refinance right now. Bank requirements have gotten super stringent and credit has tightened to the point where many banks are declining even seemingly well qualified borrowers with good credit.
If your home has declined in value now may not be a good time to sell your home or get a mortgage. Knowing when to refinance is just as important as what loan you get. You may want to wait a few months or even a year or two in order to let your home regain some of its lost value and subsequent equity.
You may feel as if you have no choice as to when to refinance if you are stuck in a negative amortization loan that is getting ready to recast at a high rate or if you have a five-year fixed interest only loan that will become adjustable soon. Unless you have outstanding credit scores (over 700 FICO mid-score) and a lot of equity (what your home is worth minus what you owe) then you will probably not be able to get approval from the bank for your loan request. The sad truth is that banks are just not lending because credit requirements are just too darn tough right now.
Loan modification is a good way to get a better rate and term without having to go through all the tedium and frustration of a full blown refinance. Sometimes it is not when to refinance as when not to refinance. Loan modification is the smart choice for thousands of homeowners who need payment relief or are experiencing the stress of a Pay Option or Negative Amortization loan that is about to recast. A loan modification is not a refinance but an adjustment to the rate and terms of a homeowners existing mortgage. The best thing is that you dont need to have good credit to get a loan modification.
When to refinance may be a question that a lot of homeowners and borrowers will be asking themselves for a long time to come. Conditions in the economy are bound to change and experts predict that the recession has bottomed out and that a long, slow recovery is just around the corner. When that happens a lot of borrowers will finally know just when to refinance and that will be when rates are attractive and lending restrictions loosen up.