Refinancing could put more money in your pocket

By Lisa Rinkus | Citizens Staff

When interest rates fall to new lows, refinancing a mortgage may seem like a no-brainer. After all, refinancing is a popular way to quickly access cash, consolidate debt, lower your monthly payments, and finance home improvements. But before making a move, it’s sensible to review your current loan structure to figure it out. In fact, financial experts say it’s wise to do this once a year with all your loans. Consider it an annual checkup. And when one of your most valuable assets (your home) is involved, hundreds of thousands of dollars can be at stake.

Why not let sleeping dogs lie?

You’re comfortable with your lender, your rate is fine, and you have no trouble paying your mortgage every month. You’ve got it down to a science. So why hassle with digging up the paperwork, getting your credit checked and dealing with the refinancing process?

There are several reasons. Here are just a few:

Lower rates:

“Rate chasing” is the number one reason people refinance, so they’ll save money over the life of their loan. Keep in mind the lender that holds your current mortgage may match a competitive rate. Be sure to check in before jumping ship. Most lenders want to keep your business. When you refinance with Citizens, you get a loan suited to your needs, expert advice each step of the way, and one of the lowest rates around.

New circumstances:

Maybe you inherited a large sum of money or just got a big promotion. Now that you have more money, you would like to pay the loan off earlier and take advantage of a lower interest rate while you’re at it. Changing to a shorter repayment term will likely increase your monthly mortgage payment, but could save you thousands of dollars in interest over the life of the loan. The icing on this cake? You’ll be living mortgage-free — sooner rather than later.

On the flip side, extending your loan’s term could decrease your monthly mortgage payment. That’s the good news. The bad news? You’ll be paying more interest over the long term.

When your nest is (about to become) empty:

Your last kid is graduating from high school in a few years. Your house is too big for just the two of you, so you’d like to downsize when they leave for college. In the meantime, you could use some cash for unexpected expenses. In this case, a refi that changes your loan terms from your fixed-rate to an adjustable-rate mortgage (ARM) and gives you some cash back (a cash-out refi) might make sense. ARMs have interest rates that are initially lower than a fixed-interest rate mortgage over the shorter term but get adjusted periodically over the life of the loan. So, an ARM may be a smart option if you are planning to stay in your home for another 20 years and need to do a refi for college tuition in five years. The important factor in this equation is how long you think you’ll keep your mortgage vs. how long you plan to keep your home. On the other hand, if you have an ARM, plan to stay in your home and are concerned interest rates will go up, refinancing into a more stable fixed-rate mortgage may be a better option over the long term.

Related Articles:

• What Is an Adjustable-Rate Mortgage?
• Is a Cash-Out Refi a Good Idea?

To stop paying extra fees:

Some mortgages have added costs, such as mortgage insurance (MI), or a mortgage insurance premium (MIP) if you have a FHA loan. By refinancing, these fees can be eliminated, if you’ve got at least 20% equity in your home. (You can calculate your equity by subtracting the mortgage from the market value of your home.) Doing a refi may also reduce your monthly payment and the amount of interest you’ll pay over the life of the loan.

Related Articles:

This glossary can help you understand mortgage terms and options.

Wedding bells are in the air:

If impending nuptials are planned, adding your spouse as a cosigner to a new loan may get you a better interest rate. If they’re a high earner? Even better. Conversely, if your spouse’s credit is not as good as yours, you may want to stay the course.

Your Credit has improved:

You’ve stopped squandering your hard-earned money and are forking out less cash for entertainment, clothing, and restaurants, for example. Perhaps you’re one of the lucky ones who have picked up healthy savings habits during the pandemic. As a result, your credit scores have improved, and you’ve got more money in the bank. Now is a good time to reevaluate your mortgage because you might be able to get a better interest rate and loan terms.

It’s easier than you think:

At Citizens, the process of refinancing is simple and straightforward. You’ll need to fill out our application, pull W-2s, pay stubs and the terms of your existing loan. If you’re an existing mortgage loan customer, we have some of that information already, such as the title to your property. (With a new lender, you would have to pay for a new title search.) Another advantage? If you keep your mortgage with Citizens, you may be eligible for a 0.125% rate discount, on top of getting a low interest rate.

Our secure, digital process enables you to upload documents and get updates on the status of your loan. Once you’ve closed and signed all the paperwork, you can expect your previous mortgage to be paid off and your new mortgage to go into effect in about four days.

The bottom line:

The decision to refinance your home can be made based on several reasons beyond those outlined here. Regardless of your motives, they all have a common denominator: reaching personal and financial objectives. No matter where you are on your journey.