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Why you should consider refinancing your mortgage

August 23, 2019 • General News

Why you should consider refinancing your mortgage

Written by Canopy Credit Union Education Officer, Jon Maroni

Mortgage refinances are very popular right now and for good reason. Interest rates have dropped for 30-year mortgages to the lowest level they’ve been since November of 2016. See for yourself - check out our home loan rates!

What that means for Spokane homeowners is that now may be an excellent time to talk to a Canopy loan officer. In order to help our members and potential members answer the question “should I refinance or not” we’ve put together a simple list that can help you proceed with confidence.   

When to Refinance:

  • When you can secure a lower interest rate, especially if your rate is going to drop by 0.75% or more.
  • When you are able to shorten the term of your loan, especially by 5 years or more, which will lower the total interest you repay.
  • When it allows you to switch from an adjustable-rate mortgage (or ARM) to a fixed-rate mortgage to lock in a consistent payment and rate.
  • When you need to tap into your equity to consolidate other more expensive debt such as credit cards or personal loans.

refinance your home today

When not to Refinance:

  • When you don’t plan to be in your home for at least four more years. When you refinance you have to pay new closings costs, which can often be financed but you need to be in your mortgage long enough to recoup them.
  • When your credit score has decreased. If your credit score has taken a hit, then you may not be able to take advantage of a lower rate.

My Personal Example:

I have a few rental properties that each started out with a 30 year fixed rate mortgage that I’m in the process of refinancing. Here is what their loans look like currently and what they will look like once the refinances are finished:

Rental Property 1 Current Loan:

  • Interest rate: 5.625%
  • Remaining payments: 347
  • Total loan balance: $66,856.47
  • Monthly payment (just principal and interest): $391.45
  • Total interest I will pay: $72,921

Rental Property 1 Refinanced Loan:

  • Interest rate: 3.99%
  • Remaining payments: 240 (20 yr. term, cuts 107 payments)
  • Total loan balance: $70,000 (closing costs financed)
  • Monthly payment (just P & I): $424 (increase of $32.55 per month)
  • Total interest I will pay: $31,716 (saves $41,205)

Rental Property 2 Current Loan:  

  • Interest rate: 4.99%
  • Remaining payments: 338
  • Total loan balance: $62,623.40
  • Monthly payment (just P & I): $351.75
  • Total interest I will pay: $61,032

Rental Property 2 Refinanced Loan:

  • Interest rate: 3.99%
  • Remaining payments: 240 (20 yr. term, cuts 98 payments) 
  • Total loan balance: $66,000 (closing costs financed)
  • Monthly payment (just P & I): $400 (increase of $48.25 per month)
  • Total interest I will pay: $29,904 (saves $31, 128)

 

By refinancing my mortgages, I will save 205 monthly payments and $72,333 in total interest repaid. Even though my monthly payments increased by roughly $80 the long-term savings are well worth it. I plan to hold onto these properties for a long time and will easily recoup my closing costs for refinancing.

If you have questions about refinancing your home, give us a call today at 509.328.2900, check out our home loan page, or schedule an appointment with a loan officer today

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