Should You Refinance Your Mortgage?

woman smiling in her kitchen

Are you thinking about refinancing your mortgage?

Interest rates are still low and it may be a good time to make your move.

You might want to refinance if one of these four situations is true for you:

  1. You'll get a lower interest rate.

    A lower rate could lower your monthly payment and lower the amount of interest you'll pay over the life of the loan. Even just one percentage point can mean thousands of dollars saved. Keep in mind, however, that you will need to stay in your home for a while to get the full savings.

  2. You could convert an adjustable rate to a fixed rate.

    If you orginially financed your home with an Adjustable Rate Mortgage (ARM) and the fixed interest period is over or about to end, you may be facing a rate and payment jump. If you're going to be in your home for a while, it makes good sense to convert your loan to fixed interest.

  3. You'll get rid of private mortgage insurance.

    If you bought your home with less than a 20% down payment, you were probably required to pay Private Mortgage Insurance (PMI). This insurance can be expensive. Thankfully, if you made enough payments to now have at least 20% equity in your home, you may be able to get rid of the PMI payment by refinancing.

  4. You could consolidate high-interest debt.

    If you have a lot of high-interest debt, it might make sense for you to use a cash-out refinance. You could pay off this debt and possibly save money if you are reducing your interest rates by a large margin. Just be careful not to make the common mistake of getting into more high-interest debt once the old is payed off.

Refinancing can be a great idea, but it's not always right for everyone. While you're thinking about refinancing, you should also be aware of some of the pitfalls.

  1. Closing costs and document fees can add up.

    Remember that refinancing fees generally cost anywhere from 3% to 6% of the loan balance.

  2. Your credit score has gone down.

    If your credit score is lower than when you got your first mortgage, it's less likely that you will get a better rate.

  3. Your current mortgage has a prepayment penalty.

    Some lenders (not RVCCU) will charge you if you pay your loan off early. You can find out whether your mortgage has a pre-payment penalty by looking at your original mortgage agreement.

If you're not sure if you can or should refinance, we can help. If you have questions or want to find out if we can offer you a lower rate, please call one of our Mortgage Specialists at (540) 982‑3931.


Source: "NerdWallet's Mortgage Guide," Anisha Sekar,