What Should You Consider When You Refinance Your Mortgage?
Refinancing home mortgage loans can save consumers significant amounts of money, but only if it’s done correctly. There are many things to consider before deciding if now is the time to approach your credit union about refinancing. Keep these things in mind as you weigh your options.
Refinancing is all about saving money and lowering your monthly payments, so the interest rates should be lower than when you got your loan. Take a careful look at how the current interest rate will affect your payment. Generally, it is not worth refinancing unless the current rate is at least two points below the rate at which you are locked in. Keep in mind that the current interest rate may not be the rate you are offered during your refinancing. A number of factors, including your credit score, can impact the interest rate you ultimately receive.
Penalties and Fees
When home mortgage loans are refinanced, the first loan is paid off with the new loan, which could be considered an early payoff. There are often large fees attached to paying off mortgages early, so consider the fee you will be charged to make sure refinancing will actually save you money. There are also fees similar to closing costs attached to refinance loans, and in some cases, hefty penalties for trying to pay off the second loan early. Include these costs in your calculations, particularly if you plan to move in the near-future and could potentially face another round of early payoff penalties.
Refinancing your home can be a smart financial move you have a plan for the savings. If you hope to refinance to pay off debt and get ahead, doing so could change your financial life, as long as you change your spending habits. Refinancing to stay afloat without a plan to change your circumstances could ultimately work against you.
Let the experts at GCS Credit Union help you make the right decision about refinancing. The team at our credit union in O’Fallon works for you, not an executive board, and are committed to your financial success. Learn more about mortgages, online banking, and more by calling (618) 797-7993.