The last thing on your mind right now is probably refinancing your mortgage, but maybe it’s something to pay attention to. 

Refinancing isn’t appropriate for every homeowner, but if the interest rate on your current mortgage is greater than 4%, or if you are in an adjustable rate mortgage and want to move into a fixed rate mortgage, now might be the right time.  Here are some important aspects to take into consideration:

The Benefits

• Reduced interest rate decreases their monthly mortgage payment
  • Example: if you refinanced a $200,000 balance currently paying 4% interest rate with a rate of 3.5% interest, you’d save $84 each month
• Repay your mortgage faster by switching a shorter-term loan
  • Some members who haven’t taken advantage of the refinancing boom have been able to shorten the term of their mortgage (i.e., move to a 15-year fixed) and keep their payment about the same or maybe only slightly higher thereby saving paying years of extra interest
• Take out some cash from the equity you’ve built up in your home through a cash-out refinance
  • Refinance rates are often lower than rates on a home equity line of credit, home equity loans, or credit cards

Considerations

• There are some costs and fees associated with refinancing but our goal at Spectrum Credit Union is to keep these costs as low as possible – make sure you understand all the costs and fees BEFORE you make a decision to work with a specific lender.
• Points or no-points? A point is 1% of the total loan amount that you pay up-front in order to reduce the interest rate (1.00 point usually reduces the rate by .25%). Most lenders give the option to pay points up-front or go for a no-point option. Points may be deductible based on qualifying IRS rules.
• The Tax Cuts and Jobs Act of 2017, allows homeowners to deduct the first $750,000 of mortgage debt on their first and second homes for loans taken after December 16, 2017. If your loan amount is greater than $750,000 you may want to think about the trade-off between refinancing to a lower rate and the fact that you won’t be able to deduct the interest on the loan amount over $750,000.
• If you are close to paying your mortgage off, or even half way there, refinancing will “reset your clock,” so think about if it makes sense to move to a new longer-term fixed rate loan.

You can see Spectrum Credit Union’s mortgage rates and see how much you can save today. Let your home help you save every hard-earned penny it can.

Check out the rest of our Home Court Series here:

• Part I – First Time Home-Buying Mistakes and How to Avoid Them
• Part II – Get Mortgage Ready in Four Steps
• Part III – Three Mortgages Every Home-Buyer Should Know

BALANCE is an amazing resource for all our members to utilize when taking on life's milestones. With trusted guidance available for free, they are ready to help everyone on the path to financial wellness. This article and many more can be found on their website: balancepro.org.