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Real Estate

To Refi or not to Refi? That is the question.

Every time the mortgage rates drop, it’s tempting to make a call to a few lenders to see where you can get the best deal on refinancing your home. Before you make those calls, take a moment to learn why there’s more about refinancing than just the attractive lower rate.

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 lender 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 web sites will estimate your home value. Your property may have increased since you purchased your home and giving you equity to potentially use. On the contrary, if your credit score or property value has decreased, you may want to hold off on refinancing. It may 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 end up paying similar costs to the ones you paid when you bought the home – 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.

Shop for a new Lender.
Your relationship with your lender is as important as with your insurance agent. Most likely your mortgage bill is the biggest payment you make every month. So, make your mortgage lender work for you! Ask for full disclosure or points, closing costs and other fees to compare through a Good Faith Estimate. Also ask how long they will commit to their rate quotes. This will help you determine how committed they are to having your business, and serving you as a customer.

As your credit union, we offer 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, we’ll let you know. We’re here to help you; that’s our number one goal. Call or stop by today.

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