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Refinance Your Home: Unlock Potential and Enhance Financial Freedom

Jul 10, 2024
here are a variety of benefits a homeowner can receive when they choose to refinance a home that can improve their financial status

If you are a homeowner and want financial freedom in your future, refinancing your home may be a solution. Not only could refinancing save you money on your mortgage payment each month, but it could also help elevate your credit score, giving you the financial freedom you desire. If you’re ready to unlock the potential of your home’s equity, keep reading to learn some of the main benefits of refinancing.

Top Benefits of Refinancing Your Home  

In today's ever-evolving financial landscape, homeowners are continually seeking ways to optimize their investments and improve their fiscal health. Refinancing your home can be a strategic move that offers several compelling benefits. From reducing your monthly mortgage payments to tapping into your home’s equity for large expenses, refinancing provides a variety of advantages that can enhance your financial flexibility and stability.

1. Eliminating Private Mortgage Insurance (PMI)

Private mortgage insurance, commonly referred to as PMI, is required by lenders when you finance more than 80% of the value of your home. When you make the smart choice to refinance when interest rates drop, you then have the opportunity to remove this insurance from your home loan if the equity exceeds 20%. When the value of your home increases and/or the loan amount is reduced, you gain equity that can qualify you to remove PMI. This can be a savings of hundreds of dollars each month, which can really add up in your savings account or go towards paying off other debt to reach your long-term financial goals. 

2. Leveraging Improved Credit Scores

Do not underestimate the impact of your credit score when it comes to negotiating your home mortgage. A higher credit score means lower interest rates and better loan terms when you refinance your home. To get your credit score in tip-top shape before you begin to refinance, these tips will help:

  • Be sure all of your bills are paid on time each month

  • Pay off credit card balances

  • Do not open new credit accounts or make any major purchases

  • Check your credit scores and look for incorrect information 

3. Modifying Your Mortgage Terms

When it comes time to refinance, be sure to compare the different available mortgage terms, such as a 15-year loan vs. a 30-year loan, to see which is better for your needs. For example, a 15-year mortgage will offer higher monthly payments, so the loan will be paid off faster and with less interest, whereas a 30-year mortgage will offer lower monthly payments, with more interest paid over the loan term. The better term depends on your unique financial situation. Also, consider switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, or vice versa, to best suit your financial needs and lifestyle. The better mortgage type depends on whether you intend to live in the home for a few years or long-term. An ARM will give you lower payments until you decide to sell, but a fixed rate is the best deal for long-term owners and financial planning. 


4. Refinancing for Extra Cash (Cash-Out Refi)

A cash-out refinance is when you refinance your home mortgage with a new mortgage that is a larger amount than you owe on your original mortgage. The difference between the old loan and new loan results in the amount of cash you will receive. Many people use this method to consolidate debt or to make home improvements that will impact their home's resale value.

5. When to Consider Refinancing

The first sign that it’s a good time to consider refinancing is when the interest rates are low. In fact, the rates should drop at least a full percentage point from what your current rate is in order to make a significant difference in your mortgage costs. When your financial status has become more stable, your family size has changed, or you have plans to stay in the home long-term are also great reasons to consider refinancing your mortgage. 

Refinance Insights: Securing Your Financial Future

Smart homeowners should consider refinancing their mortgage to take advantage of its benefits. This could include removing private mortgage insurance (PMI), reducing monthly payments, or adjusting mortgage terms to better align with financial goals and needs. Refinancing presents an opportunity to unlock potential and improve financial freedom.

Where Should I Refinance My Mortgage?

Credit unions remain a valuable resource for community-minded people. Because CCCU does not need to generate profits to pay wealthy shareholders, the savings can be passed along to members through lower fees and lower mortgage refinance rates. If you are considering refinancing your mortgage, have confidence that CCCU‘s Mortgage Team is here to help you find the best product for your needs. 

CCCU is here to help find a mortgage solution to fit your needs. Apply online or visit any of our branch locations, contact our mortgage team, or give us a call at 503.963.6666.