Virtual Branch Online Banking

Click Here to Log In
First Time User? Enroll Now.

Take Advantage of Big Rate Cuts for Mortgage Refinance

Take Advantage of Big Rate Cuts for Mortgage Refinance

With interest rates falling, there’s no better time to refinance your mortgage. With so much out of our control right now, this is one important financial move that you can control. You may have a particular goal in mind. Possibly lowering your monthly payment to make it more affordable, reducing your interest rate to save money over the life of the loan, or reducing your term to pay your loan off even faster. You might even want to get a cash-out refinance to access extra money to pay for home improvements or large expenses. Regardless of your reason for refinancing, you need to calculate all costs and potential savings to determine if a mortgage refinance is right for you.

How much lower are current rates compared to your existing mortgage rate? You might find a pretty significant difference. This could mean big savings if you still owe a hefty amount on your mortgage. Reducing your rate by just 1.0% could put more of your mortgage payment back in your pocket for other expenses.  You just want to be sure that your savings on monthly payments are enough to offset the cost of refinancing.

For example:

                                              Current Mortgage                  New Mortgage

Originated month/year          January 1, 2007                           March 2020

Original Loan Amount             $200,000                                   $139,698.79 remaining balance

Loan Term                                   30 years                                       20 years

Interest Rate                                 4%                                               2,875%

Estimated Closing Costs                                                                $4,254.58

Current Monthly Payment:  $955.11

New Monthly Payment:   $766.11

Monthly Payment Reduction: $189.00

Closing Cost Recovery: 1 year, 11 months to break even

You’ve lengthened your mortgage by 3 years, in addition to securing a lower rate, saving yourself $189 each month. If a lower monthly payment is one of your goals, this may be a smart option for you right now. It’s important to note that it’s also possible to finance your closing costs.

Record low mortgage rates – time to compare

Want to compare your existing mortgage rate with current mortgage rates? Check out Choice One Community Credit Unions Mortgage Rates easily online. Not only can you find competitive low rates, but Choice One is also offering members an additional 0.25% rate discount, plus the elimination of our $500 origination fee. Learn more about Choice One’s mortgage refinance promotion at https://choiceone.org/loans/mortgage-refinance-promo/

Considerations for mortgage refinancing

  • Current mortgage rates – How much lower are existing mortgage rates than your current mortgage rate – It must make financial sense.
  • The amount of equity in your home – Most traditional mortgages require a certain loan-to-value ratio.
  • How long do you plan on keeping your mortgage – If you’re planning on selling your home in a few short years, mortgage refinance might not be for you. There will be closing costs involved in refinancing, so you will want to be sure you reach the breakeven point for closing costs as was outlined in the example above.
  • Credit score – While your eligibility for a mortgage refinance may depend on many factors, including your home’s value and your debt-to-income ratio, your credit score is also important. It’s just another factor you need to consider prior to refinancing.
  • Closing costs – As we’ve illustrated above in the example, the closing costs must make sense. You want to reach that breakeven point.
  • Mortgage term – Lengthening your term can mean resetting the clock on your mortgage. If you are in real need of a much lower mortgage payment or need a large amount of cashback for things such as large medical or educational expenses, lengthening the term, in addition to lowering your interest rate may get you where you want to be. Just remember, it will take you much longer to pay off your mortgage. 

To sum up mortgage refinancing 

In conclusion, mortgage refinancing should always benefit the borrower in some way. This can be anything from savings on interest to supplying the cash needed for an important project or to consolidate debt. It’s also a great solution for lowering monthly mortgage payments to better fit into a tight budget and increase your monthly cash flow. With the deep cut in interest rates we are seeing, it can be a perfect time for homeowners to leverage the equity in their homes and refinance.

Ready to explore mortgage refinance? Visit https://choiceone.org/loans/mortgage-refinance-promo/