Does It Pay To Refinance Your Mortgage?

Posted by Rebecca Prince on February 2, 2017

family on couch

It might be the beginning of February, but if I had to guess, many of you out there are still trying to determine exactly how you’ll tackle 2017.  You know you want to make changes… especially when it comes to your mortgage!  But, where do you even begin?

Could refinancing be the right move for you?  Maybe!  Here are a few questions to consider before resolving to refi.

Do you have an Adjustable Rate Mortgage or a Fixed Rate Mortgage?

If you have an Adjustable Rate Mortgage (ARM), then the answer is yes and double yes!  With an ARM, your monthly payments are pretty much left up to chance.  “Even if you have to write a check to pay for the closing costs, it’s worth it to avoid the risk that your payments could go up when the rates adjusts,” says money guru Dave Ramsey.

How much longer do you plan to live in your home?

The longer you plan to stick around, the more advantageous it can be to refinance your mortgage.  If you’re planning to move in a few years, however, it’s probably not worth your time or the potential closing costs.

Do you want a longer mortgage?

No one really wants to play MORE interest on their mortgage loan!  But depending on your financial situation, a lower monthly payment may be exactly what you need.  If you’re struggling to make it month to month, contact one of our Lending Experts.  Refinancing could provide some stress relief for you and your family.

Do you want a shorter mortgage?

The shorter the mortgage, the less interest you pay.  And generally, that’s a great thing!  Perhaps, your financial situation has improved and you can afford larger payments now.   Why prolong things and spend more on interest than you have to?

Can you get a lower rate?

If you can get an interest rate that’s at least 2% lower than your current rate, we usually recommend refinancing.  Pay attention to the details though!  Be sure to weigh the lower rate versus the length of the mortgage.  If you’re stuck with mortgage payments for an additional 30 years, are you really saving money?

Are the closings costs worth it?

Even though this isn’t your first mortgage, there will most likely still be closing costs and fees you’ll have to pay.  And, that can add up quickly!    Take all the costs into consideration – title fees, local taxes, lawyer’s fees, and loan-related fees.  How long will it take you to break even?

How much equity do I have in my home?

How much does your home appraise for?  What’s the remaining balance on your current mortgage?  If you’re home’s value is less than your remaining mortgage balance, it’s called “being underwater.”  And, that will present some challenges for you!  Many financial institutions prefer that you have at least 20% equity in your home.

How close are you to retirement?

So who wants to be paying a bunch of bills as a retiree?  Not me!  I hope to be traveling or relaxing in a hammock in my beautifully manicured back yard.  As your get closer to retirement, it’s wise to eliminate as many expenses as possible.  If you’re about to gracefully exit the working world, and you only have a few years left to pay on your mortgage, refinancing probably isn’t the best decision.

How DuGood Can Help

When it comes to refinancing your mortgage, every case is pretty unique!  And while you can use the questions above as a helpful guide, nothing beats talking to one of our Lending Experts!  They have years of experience and will sit down with you one-on-one to help figure out the solution that’s best for you.

Plus, when you’re “at home” with DuGood, you’ll FEEL GOOD knowing that we won’t sell your mortgage to another lender.  All decisions are made locally, right here at the credit union.  And, they’ll be serviced by a familiar face that you know and trust!

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