Being a homeowner brings a certain peace of mind, but that doesn’t mean the challenges stop at your front door. Along with contemplating home improvement projects, paying property taxes and managing utility costs, knowing the best time to refinance your mortgage can save you money and make homeownership even more satisfying.
When to Refinance a Mortgage
There are several reasons why you’d want to refinance your existing home loan. Perhaps mortgage rates have dropped, or you want to extend or shorten your loan term or decide that you want to switch to another lender or mortgage product. You may also want to refinance to get cash out from your home’s equity for emergency spending.
Let’s take a closer look at these reasons you might consider refinancing:
- Lower Your Interest Rate: Interest rates fluctuate daily. Depending on when you bought your home, your rate may have risen or fallen. If rates are lower, you could refinance to reduce your monthly payments and save money. Be sure to ask lenders about rate-lock programs to ensure your new lower rate is locked in and doesn’t change while your refinance is being processed.
- Shortening Your Loan Term: Mortgage products come in various terms other than the traditional 30-year loan. There are shorter term programs also available, designed to fit the needs of the homeowner. A shorter term will allow you to pay off your home sooner, but it will come with a higher monthly loan payment.
- Switching Mortgage Product: Just like loan terms, there are a variety of home loan products to choose from, depending on your preferences. If you have an adjustable rate mortgage (ARM) and want to have locked-in fixed monthly payments, a 30-year fixed-rate mortgage could work. If you have a fixed-rate mortgage but want to lower your payments, you could refinance to an ARM with a lower initial rate. There are VA loan programs as well as FHA loans you may qualify for, too.
- Tapping Home’s Equity: Life happens, and when you have an emergency or unexpected expenses you might consider refinancing your home loan to take advantage of your home’s equity. The cash-out funds you receive after your refinance can be used to consolidate debt, make home improvements or any other use.
Costs of Refinancing Your Home
As a homeowner you already know there are closing costs associated with a mortgage, and this doesn’t change when you’re refinancing a mortgage. Refinancing costs will vary by lender, so it’s wise to shop around for a lender and loan that fits your unique financial situation. Compare both credit unions' and banks’ mortgage programs.
Some examples of closing costs include:
- Application fees
- Appraisal fees
- Attorney fees
- Title and insurance fees
Some lenders will allow these costs to be included into the overall loan balance so that there’s no out-of-pocket costs to the borrower. Doing this will increase the projected monthly payment. Get estimates from your lender first to see if you’re comfortable with this arrangement.
Trust in Travis
You don’t have to be an existing Travis Credit Union Member to get a home loan from us. Along with first mortgages, we do home loan refinancing, too. You can learn more at our Mortgage Hub and make an appointment with a loan officer. We can help you with all your home loan, and home equity needs.
Learn about all the things TCU does to improve your financial wellness. Visit traviscu.org today!