The Benefits of Home Loan Refinancing

Your home is likely the most valuable asset you’ll ever have, so managing its value is of critical importance to your family’s future. Once you’ve settled into your new home, you may take a closer look at your finances and find that your current mortgage isn’t ideal for you.

Home loan refinancing allows you to take out a new mortgage in place of your old one. This process is much faster than the original mortgage and purchasing process, and can give you access to better mortgage rates than before. This opportunity can save you money over the course of a 15-, 20- or 30-year loan.

Refinancing isn’t the same thing as taking out a second mortgage to pay the bills, and it generally does not add to the amount of money you already owe on your home. Instead, it leverages your credit score and improved financial health to work with a lender who can give you better terms.

Why Mortgage Refinancing Helps

Refinancing your mortgage simply means that your financial institution pays off your old mortgage and charges you a new, lower monthly payment for the new loan. Depending on your credit score and income, you may be able to get lower interest rates or a longer or shorter loan term. By getting a lower interest rate, your interest payments each month and over time can be reduced significantly.

If you got an adjustable rate mortgage when you bought your home, you may be in particularly dire need of refinancing. Adjustable rate mortgages may be a good idea if you’re a new homeowner with a career and income that’s projected to grow, but if you fall on financial hard times, any increase in your interest rates could make life more difficult for your family.

Refinancing loans also provides you with an opportunity to shorten your loan term or switch to a fixed rate loan. If you’re approaching retirement, you may find it strategic to pay off your mortgage sooner so you have one less thing to worry about during your golden years.

Refinancing Options

Your primary option for refinancing is rate-and-term refinancing. This simply has your credit union pay off the existing mortgage, and then charge you a new monthly bill to pay back the loan. This is also a good way to consolidate debts if you have a second mortgage.

Cash-out refinancing options can have similar changes in terms and rates, but they are designed to also provide cash to the homeowner. This cash is added on to the total loan amount, but you are free to use it however you need to.

If you don’t want to do a full cash-out refinancing but you still want to leverage your home’s value to improve your financial situation, you can also get a home equity line of credit. This line of credit is secured by your equity in your home, and can be used to get cash for home improvement projects and more.

The Best Place to Refinance

Credit unions’ nonprofit structure makes them an excellent choice for refinancing loans. Because they aren’t motivated by profits, they can provide lower rates and even better customer service. At a local credit union that serves a specific geographic area, you can work with a loan officer who understands the local housing market.

No matter where you got your existing mortgage, you can turn to your local credit union for refinancing loans. Credit unions can even work with FHA and other government-subsidized mortgages.

Even if you have bad credit, your local credit union will try to work with you to come up with a plan to refinance your home. This may be possible through taking on a shorter mortgage term than before, or by simply waiting a few months to bring up your credit score a little more. A credit union loan officer can coach you through your options without pressuring you into making a decision.

Refinancing your mortgage is easier than getting the initial mortgage, especially if you rely on the personalized customer service of your credit union. You will still have to provide proof of income, residency and assets, and some basic paperwork related to the mortgage. However, you will not have to provide the full purchase transfer paperwork, and refinances typically take less than 30 days.

Smarter Financial Planning

When you refinance your mortgage, you’re freeing up some of your income each month to spend on other things. This can mean more money to spend on essentials like food or utilities, or even less-essential things like clothes and extracurricular activities for your kids. Your whole quality of life can be improved by the extra cash that’s freed up if your mortgage payments are lower.

You can even pay down credit card debt or other existing loans, especially if you get a cash out refinance. No matter what the specifics of your financial situation are, you can improve them by remembering to think of your home and mortgage as things to be used to your advantage. You can almost always come up with some extra cash when you need it when you work with a dedicated and caring financial institution that works for you.

Community-Based Financial Services

Home loan refinancing is almost always a good thing, but it becomes even better if you trust your hometown credit union. A credit union can work with you to provide personalized support, and will be more willing to provide you with an affordable refinancing plan even if your credit is poor.

T&I Credit Union is a leading provider of loans and other financial services in the Detroit Metro area. We serve a seven-county area with no fees or additional restrictions on membership. Since we are a credit union, we are governed by an elected board that is dedicated to serving our members with the best rates possible.

We offer a range of personal, home and auto loan types in addition to standard checking and savings accounts. Call us today at 1 (800)-338-3908 to talk to a loan officer about how to refinance loans for your home and other needs.

About Marsha Smith

Marsha Smith was born and raised in Ohio, where she obtained her Bachelor of Arts in Public Affairs. She is passionate about financial literacy and helping other young people navigate student loans, car payments, and buying a home.