To Refi or Not to Refi? That is the Question

April 23, 2018 | By FFCCU

Person calculating a refinancing on their laptopThere are a lot of determining factors when it comes to whether or not you should refinance your home. Before moving forward, you should ask yourself some questions to better understand if refinancing is right for you.

Here are some things to consider:

  • 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?
    • Property value, location, market, condition, and age are things to considerYou 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. On the contrary, if your credit score or property value has decreased, you may want to hold off on refinancing. 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 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.

We offer a variety of mortgage products to help you with your refinancing needs. 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 help you—that’s our number one goal. Set up a personalized account review here, or contact a friendly FFCCU teammate now to discuss your options.

Posted In: Lending