Service One Credit Union’s VP of Lending Answers: How Could Refinancing My Mortgage Save Me Money?

Refinancing is restructuring your existing home loan with a new one.

Matt Whalen, VP Lending.

There are many reasons to do this. You can reduce your monthly payment through a lower interest rate. You can access your home’s equity by taking cash out for emergencies and big needs. You can consolidate debt or fund large purchases such as home improvements. There can be costs associated with refinancing your mortgage, which include the appraisal, title work, flood determination, application fees, etc. You may be able to include these costs in your loan amount if you don’t have the cash to pay them up front.

A common question people ask is: "Why would I do a cash-out refinance when my current mortgage rate is so low?" While it's true that rates are higher than they previously were, that’s not the whole story. If you're also paying on high-interest credit cards or personal loans, you could see big savings in your monthly cash spend by restructuring your mortgage payment. Consolidating that expensive debt into a new, single mortgage payment, could help your new total monthly payment be less than what you're paying now (Individual results may vary depending on credit profile, loan terms, and market conditions.) When you refinance, I recommend putting a portion of cash you receive directly into an emergency fund. The amount needed in your emergency fund is different for everyone, but I typically recommend 6-12 months of expenses. Many of us can afford our bills but don't have a safety net for the unexpected. Securing that "rainy-day" fund while your finances are stable provides incredible peace of mind, especially if you put it into a high-yield savings account to gain interest while it’s in there. The key is to be proactive. If you wait until you're in a financial emergency, it might be too late to be approved for refinancing.

As always, it is best to speak to a mortgage professional to guide you through your journey.

Want to see if refinancing your mortgage is the right decision for you? Speak with one of our Mortgage Lenders today!