When and Why You Should Refinance Your Home

If mortgage rates nearing historic lows have you thinking about refinancing your home, you are not alone. In just the first nine months of 2020, more than 6 million homeowners refinanced, according to NerdWallet ¹. By saving homeowners thousands of dollars or allowing them to tap into equity, it is to no surprise that we are experiencing such an influx of refinances. Before you make the move, it is important to have a goal in mind, to compare your current terms with today’s rates, and to weigh out the costs and benefits. 
 
The Nuts & Bolts 
A mortgage refinance is the process of replacing your existing loan with different rates or terms and sometimes even with a different lender ². The first step in refinancing a mortgage is to speak with a mortgage specialist, who can help you decide if refinancing is right for you and your financial situation. The specialist will review your current terms and rates to help you lock in the best rate for your financial background and goals.
 
Comparing your existing rate with current rates will help you decide if it is time to refinance your mortgage. If you are a current homeowner, then refinancing will feel like deja-vu. When applying to refinance, you will need to qualify for your specific type of mortgage, secure an interest rate, and cover closing costs, as necessary. Be sure to take the following into consideration before applying to refinance your mortgage: 

• Determining your financial goals. Our friendly mortgage specialists can help you understand your options and give you the knowledge to make a confident decision. 
• Shopping around for the mortgage product that best suits your financial situation. Arbor Financial offers a variety of products and terms, including 7-, 10-, 12-, and 15-year terms, plus more*.
• Talking to a mortgage specialist for the best interest rates. Call us at 269.544.3105 or schedule an appointment. 
• Securing your interest rate. 
• Agreeing upon loan terms and finalizing your loan. 

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So, When & Why? 
When considering whether to refinance your mortgage, one of the most important steps is determining your purpose for refinancing. There are several different reasons to refinance your mortgage, some including ⁴: 

1. Reduce monthly payments. This can happen when you refinance to a lower interest rate or extend your loan term. 
2. Shorten the loan term. When you refinance to a shorter term, you can pay off the loan in less time. For example, refinancing from a 30-year mortgage to a 15-year mortgage will allow you to pay off the loan in half the time, also cutting down on interest owed. 
3. Tap into equity on your home. This route comes with options that are a great way to access money for home improvements, help fund college tuition, cover unforeseen expenses, and give you and your family peace of mind knowing that you have a rainy-day fund for those stormy situations.: 
   • Cash-out refinancing: Some choose to refinance to borrow more than they owe on the current mortgage, that way the lender gives the borrower a check for the difference. 
   • Home Equity Line of Credit (HELOC): Homeowners who have equity in their home can use it as revolving credit and borrow against it when they use a HELOC. This can come in handy when you need access to funds at a favorable interest rate.
4. Switch from an adjustable- to a fixed-rate loan. Because interest rates fluctuate on adjustable-rate mortgages, you can end up owing more over the long run than desired. Fixed-rate loans have interest rates that remain constant, providing financial stability. Arbor Financial has a new, 15-year fixed special with great low rates*.

Deciding when to refinance your mortgage can seem difficult, but it does not have to be when you consider the right details. Some factors include ³: 

• Current interest rates. 
• Your credit score health. 
• Your goals. 
• The value of your home. 
• The current economic climate.

Depending on whether these factors are more favorable in the present versus when you originally purchased your home will help you decide whether refinancing is the right move to make. 

See the Savings in Action 
Once you have decided if refinancing is right for you, it is time to look at the numbers. Our Refinance Calculator can help in removing some of the guesswork and determining how much refinancing could save you. This easy-to-use calculator can give you an estimate for mortgage rates, monthly payments, and show readjusted total interest over the life of your loan. 
 
Your needs for refinancing your mortgage will vary, but an experienced and friendly mortgage specialist from Arbor Financial can help guide you in getting the most out of your refinanced home loan. Call us at 269.544.3105, apply online, or schedule an appointment to get started today, or visit arborfcu.org/quickquote to get a free, instant personalized mortgage quote. 



*Annual Percentage Rate (APR). Special 2.137% APR is the lowest rate available and current as of 2/2/2021. Rate based on a $150,000 loan with no PMI. Payment example: 15-year special is 180 monthly payments of $964.57. Does not include taxes or insurance and your payment will be higher. Rate listed is for a refinanced mortgage on owner-occupied single-family primary detached residence. Rate may vary depending on credit history and underwriting factors. Programs, rates, terms and conditions are subject to change without notice. Other restrictions may apply.
1. Lewis, H. (2021, Jan. 26). Mortgage Interest Rates Forecast. Nerdwallet. https://www.nerdwallet.com/article/mortgages/mortgage-interest-rates-forecast 
2. Warren, K. (2020, October 13). What Is Mortgage Refinance? The Simple Dollar. https://www.thesimpledollar.com/mortgage/what-is-mortgage-refinance/ 
3. Lee, J. (2020, October 7). When to Refinance Your Mortgage. The Simple Dollar. https://www.thesimpledollar.com/mortgage/when-to-refinance-your-mortgage/ 
4. Bundrick, H. M., Lewis, H. (2020, December 18). How and Why to Refinance Your Mortgage. Nerdwallet. https://www.nerdwallet.com/article/mortgages/how-to-refinance-your-mortgage