Financial Advice

Refinancing Your Mortgage

Refinancing is paying off your existing mortgage with a brand new mortgage. Why and when should you refinance your home—or hold off until a better time? We’ll help you decide.

Published Dec 13, 2013 | Updated Feb 9, 2024

Why and when should you refinance your home?

Refinancing is paying off your existing mortgage with a brand new mortgage. When would refinancing make sense?

  • To lower your payment – Refinancing at a longer term or a lower interest rate can reduce your monthly payment.
  • To build equity – Refinancing a 30-year loan to 15 years can reduce your overall interest costs and help you build significant equity through time. Based on your current and proposed interest rates, the payments can be higher, but well worth the overall reduction in interest.
  • To change rate types – Depending on your situation, you may want to switch from an adjustable-rate mortgage to a fixed-rate, or vice versa.

When refinancing may not make sense:

  • If you'll be moving soon – Since you will be paying closing costs to get a better rate or term, the interest rate savings over your remaining time in the home should be equal or greater than the closing costs or you haven't saved anything. If you look at the money you might have earned by placing the closing cost money in an investment, the “this is worthwhile threshold” may even be higher.
  • If you're already several years into your mortgage – Once you are halfway through your mortgage, you've have started to pay down the loan principal. When you refinance, your initial payments will be primarily interest again. As a result, your payments may be lower, but you could pay more interest over the life of the loan.
  • If refinancing extends your mortgage past retirement age – If you haven't planned for house payments after retirement, you may want to either skip refinancing or make sure your new term does not extend past your original pay off date.

Let us help you determine what's best for you

UFCU can help you determine if refinancing makes sense for you. We can take into consideration all the factors and your preferences and let you make the decision. If refinancing will actually increase your loan costs, we will tell you.

For more information, contact one of our mortgage professionals.

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