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When Should You Refinance Your Mortgage?

Mortgage rates are still low. Did you think you missed your home refinance opportunity? You might be one of many Americans who could still benefit from refinancing your home. So, when should you refinance your mortgage?

No Cost Review

There are many different reasons to refinance your mortgage. At Mid Oregon Credit Union, we offer a no cost review of your situation to see if a refinance makes sense. Because there are costs with doing a loan (Typically 2.5-3.5% of the balance) it is important to calculate the savings advantage.

Reasons to Refinance

Here are some of the reasons to consider a refinance:

  1. Saving 1% on your interest rate. The break-even point in the cost of fees and the savings in interest rate must be calculated, but generally 1% is a good benchmark.
  2. Removing Private Mortgage Insurance (PMI). This is an insurance that you pay monthly because the amount of your loan was over 80% of the value of the house. This charge can be seen on your mortgage statement. If your value has increased moving your loan to under 80%, then a refinance can make sense. The break even point needs to be calculated to show when you would start saving with a refinance.
  3. Moving from a variable to a fixed rate loan. If you plan to stay in the property long term, then it may make sense to refinance while rates are low. The refinance can provide a long-term stable payment.
  4. Refinancing to shorten the term. Shorter term loans have a lower interest rate. The difference between a thirty- and fifteen-year mortgage can be a drastic savings of the total amount of payments. It is important to make sure that the larger payment is comfortable, because it would be expensive to refinance again just to lengthen the term.
  5. Home Improvements. Refinancing for home improvements may make sense. It is also important to review the total cost compared to doing a shorter-term home equity loan.
  6. Debt Consolidation. Saving interest rate makes sense in some cases; remember that the debt is being stretched over a longer term and this has a cost. The positive thing about debt consolidation is the immediate savings in monthly payments. Debt consolidation loans should also be compared with home equity options to find the best savings.

Money Can Be Saved

About 3 million borrowers could save at least $200 a month by refinancing. Asking yourself the question of “when should you refinance your mortgage”, and reviewing the reasons, do you have an answer? Could that be you? By refinancing and locking in a better rate on your loan, you could reduce your monthly payment and save thousands of dollars in interest on the life of your mortgage.

We can help you decide. If you are interested in scheduling a no cost review to determine if a refinance benefit you, then please email us at realestateloans@midoregon.com or call (800) 452-3313. For more information about our home loans and our home loan team, visit www.midoregon.com/loans/homes.shtml