With the uncertainty and volatility of the last few years, it’s becoming harder for people to manage their finances. Even if you own your home, you may find yourself in a tough spot.

If you’re struggling to wrap your head around your monthly budget, refinancing your mortgage can be a great way to get things back in order. The problem is, how do you know if it is a good time to refinance? Home loans are complex, and they can be impacted by a variety of outside factors. And like most financial choices, the answer will be different from person to person.

If you're weighing the option, here are a few things you’ll want to consider:

What Is the Status of the Market?

The best indicator of whether or not it’s a good time to refinance will be the housing market. Mortgage rates rise and fall according to economic decisions made by the Federal Reserve. While this doesn’t directly change mortgage rates around the country, it does affect the overall cost of borrowing and—by extension—mortgage rates.

For example, as the Fed makes changes to control unemployment and inflation, mortgage rates rise and fall accordingly. If you’re considering refinancing but the rates are high, you might want to wait until rates are more favorable. If you took out your original loan when rates were high but now they’ve dropped substantially, this could be a good time to refinance.

What Is Your Current Mortgage Rate?

While it’s important to know and understand the state of the market, as you can see, you need to know how to take that information and apply it to your individual situation.

How much do you pay each month, and how long are you expecting to pay it? See how your mortgage rate compares to the current market average. Most financial experts would say that if you can shave 1 percentage point off your rate, you should go for it. Even just 0.5 points off might be worth refinancing, depending on your situation.

A fraction of a percentage might not sound like a huge difference, but you have to keep your long-term finances in mind. What might be less than a hundred dollars off your monthly payment can quickly add up to thousands saved over the life of your mortgage. Talk to a trusted lender and see about getting a quote. If you can get a rate that’s a significant enough improvement, it might not be a bad idea to go forward with a refinance.

Has Your Financial Situation Changed?

Mortgages take years to pay off, and a lot can change in your life over the term of one. It’s not uncommon for your financial situation to improve over the course of a mortgage, sometimes making it a good time to refinance.

For example, if you’ve started a new job or received a promotion that has significantly increased your regular income, you may want to look into refinancing into a shorter-term loan. It will mean a higher monthly payment but less paid in interest overall. With more money coming in than when you took out the loan, it may not be outside of your budget, and it may be worth it in the long run.

Also consider any debts you may have paid off since the beginning of your initial loan. Eliminating student loans or credit card debt can help increase your credit score, possibly earning you a better interest rate now. Any improvement to your financial situation can help you get a more favorable mortgage, so don’t be afraid to see what your options are now.

When Are You Thinking of Refinancing?

In addition to outside market factors, the actual date you want to refinance can make a difference on whether it’s a good time to refinance.

Seasonality can shift mortgage rates, depending on when you start thinking about refinancing. The summer is often a more active time for the real estate market, as warmer weather tends to bring out more prospective buyers to tour homes. As such, rates can creep upwards if you seek out at this time.

On the other hand, things tend to slow down in the winter. The holiday season can be overwhelming, and the last thing people want to handle on top of all that is selling their home, so rates often drop. This can help you secure a lower mortgage rate.

Some people may advise you to seek out refinancing at the end of a month or a calendar year, in the hopes that your lender might be trying to close out all their loans before the end of the financial calendar. This isn’t a certain thing, though, as a lender’s financial year may not match up exactly to the calendar year.

How Much Have You Invested in Your Home?

Buying a home is an investment. In fact, it’s one of the best investments you can make. Not only do you gain a place to call your own, but you also get something that’s nearly certain to hold and accrue value. That value can actually be helpful when it comes to deciding if it is a good time to refinance.

Equity is the amount of your initial mortgage that you have paid off versus your home’s current market value. Generally speaking, in order to qualify for refinancing in the first place, you need at least 20 percent equity in your home. The longer you’ve been living in your home and paying your loan, the more equity you’ll have built up. If your home value increases over the term of your loan, your equity will also rise. Even if you weren’t able to refinance before, that rise in equity may be enough to make you qualify. If your home equity is high enough, you may be able to do a cash-out refinance and access some of that equity for a larger expense, such as home renovations or purchasing a vacation home.

If you still have questions about if it’s a good time to refinance, reach out to the experts at Solarity Credit Union. Their Home Loan Guides will help you look at your situation and determine the best path for you.