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Is Now the Time to Refinance My Mortgage?

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A mortgage loan is one of the most affordable ways to borrow money.  Refinancing your home loan can help accomplish several objectives including:

  • Moving from an adjustable rate to a fixed rate.
  • Reducing the total interest paid on the loan.
  • Lowering your monthly house payment.
  • Financing a home improvement project.
  • Consolidating debt at a lower interest rate and payment.

Is Refinancing Worth the Cost?

The answer is it depends. Here are a few key points to consider when evaluating refinancing your home:

  • Costs to refinance your home range between 2%–5% of the loan amount.
  • Compare the cost to your monthly savings.
  • The length of term remaining on your current loan.
  • How long you plan to live in the home.

The good news is that Transcend Credit Union offers refinance options that have no closing costs and/or no private mortgage insurance (PMI). You can find out more by viewing our different loan options or by contacting one of our Home Loan Experts.

Lowering Your Mortgage Payment:

Lowering your monthly mortgage payment, by refinancing to a lower rate can make it easier to pay your mortgage each month.  A lower mortgage payment also makes it easier to pay other household expenses and debts. Here are a few points about lower monthly payment:

  • The best rates are given to borrowers typically with a 760+ credit score.
  • Monthly savings can help eliminate other debt.
  • Rates can be lower on shorter 15-year terms.

Consolidating Debts:

Before refinancing a mortgage to pay off debt, make sure you have enough equity. Ideally, you want to keep your home loan-to-value (LTV) below 80% to avoid PMI being added to your loan. Take these factors into account when thinking about doing a debt consolidation:

  • Current Mortgage Amount / Approximate Home Value = LTV ratio.
  • Evaluate the term of the debt you are consolidating vs. the mortgage.
  • Consider a 15-year mortgage instead of a 30-year mortgage.

Refinancing your home to pay off your debts (debt consolidation) can save you a lot in current interest charges and lower your monthly debt payments.

Cash-Out Refinance:

You may refinance your home to get cash to fund a home improvement project, pay off debts, or supplement their income temporarily.  Keep in mind the following points when contemplating the cash out option:

  • It reduces your equity and your net worth.
  • Do a cost/benefit analysis prior to doing a cash-out home refinance.
  • Ask yourself if it aligns with your long-term financial goals.

Talk to an Expert:

Analyzing home loan options can be complicated and confusing. If you have questions about refinancing your home, talk to the Home Loan Experts at Transcend Credit Union. We can educate you about home loan options and find a program that fits your needs.