Frontwave Blog

When's the Right Time to Refi?

With mortgage rates low, many homeowners are wondering whether they should consider refinancing their homes. Everyone’s situation is unique, but there are five general scenarios when it can be a smart financial move.

1. Refinancing would save you money.

Of course paying less interest and keeping more money in your pocket is a top reason for refinancing your mortgage. But don’t assume that's as simple as getting a lower interest rate. Be sure to look at all the costs of refinancing. For example, if you extend the term of your loan (say getting another 30-year mortgage when you’ve already lived in your home for five years), you may end up paying more in the long run.

2. You want to move from an adjustable-rate to a fixed-rate mortgage.

Want the security of knowing your interest rate and monthly payment (minus taxes and insurance) won’t change? Moving to a fixed-rate mortgage may be a good choice for you, especially if you plan to stay in your home for at least a few more years.

3. You want to build equity faster by shortening the term of your loan.

If you can afford a higher monthly payment, refinancing your mortgage for a shorter term, like 10 or 15 years, can help you build equity faster and pay off your home more quickly. In general, you’ll also pay less interest over the life of the loan.

4. You want to tap into the equity in your home.

When you refinance, you may be able to “cash out” some of the equity in your home and use that money to remodel your kitchen, put in a swimming pool or pay for your child’s college tuition, for example. A cash-out refinance is similar to getting a home equity loan, but instead of having two monthly payments, you’ll just have one. Frontwave offers several cash-out mortgage options, including on our VA loans and Jumbo mortgages.

5. You want to stop paying PMI (private mortgage insurance).

If you bought your home within the last few years and put less than 20% down, you may be paying PMI in addition to principal and interest each month. This can add up to hundreds or thousands of extra dollars coming out of your pocket every year. But if home prices have increased since you purchased, refinancing may allow you to get rid of PMI. Keep in mind, this generally only works if you owe less than 80% of your home’s current value on your existing mortgage. One exception: if you're eligible for a VA loan and have a non-VA loan you want to convert through the refi process, you can also to get rid of PMI, regardless of the current value of your home.
At Frontwave Credit Union, our goal is to make the mortgage refi process as simple and easy as possible. To learn more, call our home loan experts directly at 760.631.8717. Or click here if you’re ready to apply.