Perfect Timing for Refinancing?

Making a living as a stockbroker is hardly a walk in the park. To help their clients make successful investments, they must correctly interpret countless market variables. You face a similar challenge if you're trying to pick the perfect time to refinance your mortgage.

Timing is the key to comedy-make a joke at just the right moment, and the audience roars. Great timing is also critical to a mortgage refinance, but the stakes are considerably higher. If you try to catch mortgage rates at their lowest point and you make a mistake, it could cost you thousands of dollars--hardly a laughing matter.

Timing the perfect mortgage refinance means that you're gambling on the mortgage market. It's a guessing game, which can lead to big savings or losses. Here are some simple ways to mitigate the risk.

Pick your rate

It's easy see why people hold out for a rate drop. The savings can be significant; a drop of as little as a quarter of a percent on a 30-year fixed rate mortgage can trim thousands of dollars in long-term interest.

The problem arises when you try to guess how low rates will go. Mortgage rates are no different than the stock market. A multitude of factors can cause a rate spike or dip. Countless professionals spend their entire careers trying to predict these rates, and they generally fail more often than they succeed.

The best move a novice-and even a professional-can make, is to pick a rate that you can live with, and set that as your target. If the rate drops to that level, lock in the deal and don't look back. You can always refinance the loan if rates head significantly lower, but you'll be protected if they should spike.

Don't forget the product

When you're considering which mortgage to choose, consider your needs over the next three to five years. Are you young and starting a family? If so, opt for the lower monthly payments of a 30-year fixed mortgage. If, on the other hand, retirement is on your horizon, consider clearing up your debt and moving to a 15-year term.

The point is not to get fixated on the mortgage that has the lowest rate. You need to factor in all the components of a loan-including whether or not the rate will adjust, and how much you'll spend in long-term interest costs. Your approach should be to find the best rate and the best product for your personal financial situation.

Great timing will take you far in the world of comedy. But it's much more difficult to time a mortgage than it is to time a joke. Catching mortgage rates at their lowest point involves too many variables. Instead, target a desired rate and product before you begin shopping for a loan. It's the only way to get a mortgage that's guaranteed to put a smile on your face. Wait too long, and the joke may be on you.