When Should I Refinance My Mortgage?

First, assessing your financial situation and goals is essential to understanding whether refinancing is the right move for you. If your goals align with one or more of these situations, refinancing may be a sound choice:

• You want to repay your loan faster.
  Refinancing to a new loan with a shorter term can help you achieve equity in your home more quickly.

• You want to lower your monthly payments.
  Refinancing to a longer-term loan or a loan with a lower rate could reduce your monthly payment if you want to add more room to your monthly budget for other costs.

• You're staying in your home for the long term.
  If you have decided to live in your home for a longer period of time, you may want to lock into a better interest rate or pay the loan more quickly. Closing on a new loan can be costly, so if you’re set on moving soon, refinancing your current home may not be a good option.

• You want access to cash.
  A cash-out refinance is a mortgage that pays off the cost of your current mortgage plus provides additional money. Cash-out refinances give you access to funds for a home improvement project, paying off other debts, and more. A Home Equity Line of Credit (HELOC) can be an excellent alternative to a cash-out refinance due to lower cost, lower fees, and more flexibility to take out money whenever you need extra funds. 

Next, take a look at your current loan terms, including:

• The type of loan (fixed vs. adjustable),
• The interest rate,
• And the term length.
  

If you have an Adjustable Rate Mortgage (ARM), refinancing to a Fixed Rate Mortgage could give you more stability and predictability in your monthly payments, but may result in a higher rate in the short term or longer if market rates decrease in the future. Or, if you're currently paying off a 30-year loan, refinancing to a 15-year loan could help you save interest and pay off your loan faster.

Regarding timing, you should consider your credit score and your current loan’s interest rates. If interest rates have dropped since you took out your home loan or your credit score has improved, you may qualify for a lower interest rate. This could help you save money on your monthly payments and over the term of your loan.

Refinancing your mortgage comes with upfront closing costs, which can add up. You'll want to make sure you can make up for those costs through your monthly savings or by shortening the term of your loan. 

It's also important to note that if you choose a cash-out refinance, you'll be taking out a larger loan and potentially extending the term of your loan. This could result in higher monthly payments and more interest paid over the loan's term, so weigh the pros and cons carefully.

If refinancing sounds like the right decision for you, view our refinancing resources to understand all the steps involved. SECU mortgage specialists are also available daily to answer any questions in person at your local branch, by email at mortgagecenter@ncsecu.org, or by calling (877) 589-1547 from 8 a.m. - 9 p.m. ET.