Refinancing the Smart Way

When mortgage rates go down, it’s tempting to call your credit union to see if you can save money by refinancing your home. Before you make that call, take a moment to learn why there’s more to refinancing than just the attractive lower rate. Then talk with a loan officer to see if it’s the right move (without moving) for you.

Why are you interested in refinancing?

Lower rates, smaller monthly payments and fixed rates are all good reasons to consider refinancing your home. Determine your goals for refinancing first. Then, your credit union can figure out the type and terms of the loan that you need to help you achieve your financial goals.

Is the timing right?

You may have purchased your home when your credit score was much lower than it is now. Refinancing with a higher credit score rating could yield better rates and terms for you. Also check your property value – a variety of websites are available to estimate your home’s value. Your property value may have increased since you purchased your home, giving you equity to potentially use. If your credit score or property value has decreased, you may want to wait to refinance--it could end up costing you more in the long run.

Can you recover your costs?

If you are looking to lower your monthly payment with a refinance, it’s important to know if you can recoup the refinancing costs. When you refinance your mortgage, you will pay similar costs to the ones you paid when you bought the home – for example: appraisal, credit report, closing fee, underwriting and processing fees. Consider if it’s worth paying these costs to reduce the amount of your monthly payment. A good method is to divide the total cost to refinance by the amount of money you are saving each month in your payment – this is how long it takes to recover your costs. For example, if you are paying $2,000 to refinance and saving $100 per month, it will take you 20 months to recover. Make sure you plan on living in the home at least that long or you will be wasting your money.

Your credit union offers a variety of mortgage products to help you with your refinancing needs. If you’re considering refinancing your home, we welcome the opportunity to speak with you about your financial goals. Our mortgage experts can help you determine the next step in the refinancing process. And

 we’ll be honest with you – if now isn’t the right time for you to refinance, we’ll let you know. We’re here to do what’s best for you, so let’s talk.

This educational article is provided as a courtesy by your credit union’s home loan partner, myCUmortgage. For information regarding your unique home loan needs, please work with your credit union loan officer.