The Women's Journal

Is It Time to Refinance Your Mortgage?

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You love your home. But your mortgage? That might be a different story.

If you’re like many homeowners, sky-high interest or the wrong type of mortgage could keep you from enjoying your home for all it’s worth.

Refinancing could be your answer. With this popular solution, you can keep the home you love but swap out your existing mortgage for one that’s a better fit. Here are eight signs that refinancing is right for you.

1. Rates Are Low

Mortgage interest rates are constantly changing, so timing is essential.

If you want to lock in a fixed rate, you’ll want to refinance when average mortgage rates are low. If you got your current mortgage during a time of high interest, switching to a lower-rate loan could save you many thousands of dollars (use our mortgage calculator to see for yourself).

While rates on home loans are starting to rise, they’re still historically low. According to Freddie Mac, in 1981, the average rate on 30-year fixed-rate mortgages hit a whopping 16.63%! That’s higher than many credit cards today.

Because rates are currently very low, now is a great time to refinance if you meet some of the other conditions below.

2. You’ve Built Up Equity

Borrowers who have had their home for a while often benefit most from refinancing. Along with getting typically lower rates, longtime homeowners won’t have the extra cost of private mortgage insurance (required until you’ve paid off at least 20% of your home).

Also, you’ll need to have equity in your home if you’re looking to access extra cash (see #6 below).

3. Your Finances Are in Good Shape

If you’ve been in your home for a while, chances are you’ve advanced in your career and now have more income, more savings, and better credit than when you got your mortgage. Strong finances, including a great credit score, are key to getting the best available rate.

4. You Want to Own Your Home Sooner

The 30-year mortgage is popular because it lowers your payments by spreading them out over a longer term. However, the extended term allows more time for interest to grow.

Provided they can afford higher monthly payments, homeowners who want to save money and own their home sooner (such as those approaching retirement) often refinance to a term that lets them pay off their home faster.

5. You Want Lower Payments

On the other hand, you may want to save money now by lowering your payment. Maybe you financed your home with an adjustable-rate mortgage, and your rate jumped up when the initial fixed-rate period came to an end.

Or, maybe you’d like to spread out your payments over a longer term and lock in a low fixed rate with predictable monthly payments.

6. You Want Access to Cash

If you’re planning to build an addition, redo your kitchen, or help your child pay for college, refinancing could be a great way to access low-cost funds. This is done through cash-out refinancing, in which you borrow more than the loan balance, then pay back this extra cash as part of your monthly payments.

It’s important to keep an eye on the current housing market. Home prices fluctuate, and if local home prices have dropped, this will affect the value of your equity in your home.

7. You Plan to Stay

Refinancing requires an upfront investment: up to a few thousand dollars in closing costs. Through lower payments, you’ll make this money back over time, which is why refinancing only makes sense if you don’t plan on moving in the foreseeable future.

8. It Will Simplify Your Finances

Some homeowners use the equity they’ve built up to take out a second mortgage such as a home equity line of credit. This can be helpful, but it also leaves them with two separate mortgages to keep track of. A refinance can be used to consolidate your first and second mortgage, paying them off with one lower-rate loan and one simple monthly payment.

Ready to Refinance?

We’re ready to help! At Dover Federal Credit Union, we’ll help you find the right refinancing option and make the process a breeze.

Turn to us for great low rates and flexible options, including our low-rate Equity Advantage loan that pays off your home in only 10 years. To learn more and get started, reach out today, or start our easy online application right now.

302-678-8000    888-818-3328