3 Signs It's Time for a Mortgage Refinance

Many people think of their home as a member of the family, complete with its own personality and quirks. We love our homes because of (and sometimes in spite of) those things, and over time they become a cherished part of our lives.

Plus, just as every member of a family needs loving care and attention, the home you own takes more than just goodwill to flourish—it also has financial needs, including maintenance, repairs and, of course, the monthly mortgage.

One day, you’ll pay off that mortgage and it will surely be a day to celebrate. But until that day arrives, it makes sense for you to review your mortgage periodically to ensure you’re getting the best deal possible. Interest rates may be rising, but not enough to take refinancing off the table for everyone. In fact, Fannie Mae and Freddie Mac have forecasted only a modest drop in refinancing for 2019, compared to last year.

You may find yourself asking questions such as: Should I refinance my mortgage? How do I know when to refinance my mortgage? When does it make sense to refinance? Are interest rates lower than my original loan?

Whatever questions you have and whichever options you may be interested in, it's important to do your research to find out what may be available to you and what you will benefit from most. Let's take a look at three major signs that could tell you that it's time to consider refinancing your mortgage:

1. Your interest rate is higher than current mortgage rates—In the past, experts have said it was worth the money to refinance if you could reduce your interest rate by at least 2%, but today, many lenders say even 1% savings is enough incentive to refinance. Interest rates have reached record lows, prompting many to consider refinancing. If you purchased your home a decade or so ago, there's a good chance you could refinance and get a great mortgage rate in return for your efforts. Do some research—if today’s rates are lower than your existing one, now may be a great time to refinance.

2. Your credit score has recently increased—One of the major focal points when working through the process of purchasing a home is your credit score. With most loans, you have to have a minimum credit score of about 620. Some require a score that's a bit higher. If you originally qualified for your loan with a lower credit score and it recently jumped up a bit, now could be a good time to consider refinancing. Perhaps you paid off a credit card or two, or maybe you made the final payment on your auto or student loan. Whatever the case may be, your credit score has gotten a boost and now is the perfect time to think about the possibility of refinancing your mortgage!

3. You want to lower your monthly payment—Everyone would like to have a lower monthly mortgage payment, and refinancing your mortgage could be just the ticket to get there! It could reduce your rate or extend your mortgage payments over a longer period of time, making it possible for you to take advantage of a lower monthly payment option.

   With this option, there are a few things you need to take into consideration. Are you planning to stay in your home for a while? Even with a lower monthly payment, you need to stay in your home long enough to recoup the cost, since closing costs and refinancing fees may total 3–6% of the loan’s principal. Before committing to a refinance, find your “breakeven point”—how long it will take before you recoup the cost of refinancing. Use Mountain America’s refinance calculator and input details from your existing loan and a refinanced loan to determine your breakeven point.

If you're interested in refinancing your home but are unsure of where to start, the team here at Mountain America Credit Union is happy to help you along your journey. Set up an appointment with a personal banker to get all of the details on your options and get the process going.

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