Should You Refinance Your Mortgage?

family outside of house

Whenever mortgage interest rates make the news for being historically low, chances are the idea of refinancing your mortgage has been on your mind. But how can you be sure refinancing your mortgage is really worth it? Here are some things you should think about before refinancing your mortgage.

What does it mean to refinance your mortgage?

Refinancing your mortgage is essentially paying off the remaining balance on an existing home loan by taking out a new mortgage loan, usually with a lower interest rate.

Reasons to refinance your mortgage

It’s important to figure out why you want to refinance your mortgage. Are you wanting a lower monthly payment? Are you wanting to consolidate your debt? Are you needing a cash-out refinance for home improvement projects or other big expenses?

Lower monthly payment

The main reason homeowners refinance a mortgage is to take advantage of a lower interest rate. With a lower rate, you can decrease your monthly mortgage payment and build equity in your home sooner. Reducing your interest rate by even just 0.50% or more can increase your cash flow and should be reason enough to refinance.

Use our free online mortgage calculators to determine how much a mortgage refinance could save you.

Consolidate debt

Refinancing your mortgage to consolidate higher-rate debt is another good reason to refinance. You would refinance your mortgage with a new loan amount that includes any existing debts. This way you’ll have one monthly payment instead of several and paying off your higher-interest debts faster can also help improve your credit score.

Extra cash for big expenses

Sometimes, homeowners will refinance to use their home’s equity to get extra cash for bigger expenses like home renovations or college tuition. To do this, you’ll increase your loan so you can pocket the difference from paying off your existing mortgage. You’ll need to stay within the loan-to-value (LTV) guidelines. This is the mortgage amount divided by the appraised value of your property.

For example, if you own a home worth $400,000 and you owe $240,000, and your lender has an 80% LTV option, you could refinance into a $320,000 loan and take out the $80,000 difference in cash.

Where should you refinance your mortgage?

Once you’ve determined a mortgage refinance is right for you, it’s a good idea to make sure you’re getting the best loan options available. Lenders can provide loan estimates for you by outlining the rates and fees that would apply to you. If you already have a relationship with a financial institution, like your credit union, start there. Having an established relationship may make you feel more comfortable through the process.

Now through December 31, 2021, you’ll pay no origination fee when you refinance your mortgage with Partner Colorado. The origination fee is typically 1% of your total loan amount. For example, if your loan is $300,000, your origination fee would be $3,000. With a mortgage loan with us, that money stays with you.*

 

 

*Savings on origination fee will vary based on the mortgage loan amount. The promotion applies to primary residence and secondary homes that are located in Colorado only. Certain conditions and restrictions may apply. All applicants must qualify through normal underwriting guidelines, in addition to credit and income qualifications. You must apply for your home loan between 10/1/2021 and 12/31/2021 and fund by 1/15/22 to receive promotional offer.