Palisades Credit Union Go to main content

To Refinance or Not To Refinance

To Refinance or Not To Refinance9/26/2016

To Refinanced or Not To Refinance - Image of a wooden house with a sign that says Refinance Your Mortgage


Have you checked mortgage interest rates lately? If rates happen to be lower than when you bought your home, it may make sense to refinance to a lower rate. Refinancing CAN save homeowners money, but it may not always be the best option for everyone. Read on to learn more about mortgage refinancing, the different types of mortgage refinancing, and how you can determine whether "To Refinance or Not To Refinance."

What is a Mortgage Refinance?

Refinancing a mortgage means paying off your existing home loan and replacing it with a new loan. You will need to go through the mortgage application process and closing process since it is a new loan. This might sound tedious, or redundant, but there are many reasons why a homeowner would choose to refinance their mortgage.

Top Reasons For Refinancing A Mortgage

The most common reasons people choose to refinance a mortgage include: 

Change the length of your loan - For example, a homeowner with a 30-year home loan may want to refinance to a 15-year mortgage to shorten the length of their loan. You can pay off your mortgage sooner and save on interest. A homeowner can also choose to do the opposite, and switch from a 15-year loan to a 30-year mortgage. This will lower your existing monthly payments but will extend the life of the loan. This can be a good option for people who are having trouble making their monthly payments and need some breathing room.

Convert from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage - Adjustable rate mortgages have a fixed period in which the interest rate does not change. Once that period runs out, the interest rate can fluctuate based on the market. ARM holders often consider refinancing with a fixed-rate mortgage to avoid paying a potentially higher interest rate, and an increase in their monthly mortgage payment.

Get access to cash - A “cash-out refinance” is similar to a home equity loan in that it gives you access to your home’s equity. You can use the cash for anything you like. However, you may end up paying more in interest as your loan amount will likely increase. Get a lower interest rate - The most popular reason to refinance a mortgage is to lower your interest rate, which can save you money in both the short and long term.

Get a lower interest rate - The most popular reason to refinance a mortgage is to lower your interest rate, which can save you money in both the short and long term. Check the current mortgage rates in Nanuet, Orangeburg, and New City. 


When you refinance a mortgage you replace your existing loan with a new loan at a new rate.

Why Should I Refinance To Lower My Mortgage Rate?

When you choose to refinance a mortgage with a lower rate, you’re not just lowering your monthly interest payment, you’re lowering your overall interest rate. Depending on how much interest rates have dropped since you purchased your home refinancing to a lower rate could save you thousands of dollars over the life of the loan. In the past, experts advised only to refinance if you could reduce your interest rate by up to 2% however, with rates as low as they are today experts agree that lowering your interest rate by just 1% offers enough savings to make it worthwhile for homeowners.  For example, if you reduce the interest rate of a 30-year $200,000 mortgage by just 1%, from 6% to 5%, you can save over $45,000 in interest payments.

As we mentioned, a lower interest rate can also mean a lower monthly payment. With a lower monthly payment, you can use the extra money to build your savings, pay off debt, or help with everyday expenses. 

The best time to refinance is when mortgage interest rates are lower than when  you bought your home. - Image of wooden homes and a down arrow indicating rates getting lower

When Should I Refinance My Mortgage To A Lower Rate?

Mortgage rates are low - Interest rates on mortgages can change from year to year and even day to day so it can be hard to know when it’s the right time to get the best rate.  As we mentioned above, you may want to consider your refinancing options once current mortgage rates are at least 1% lower than your current rate. Because of the ever-fluctuating market, you should direct your questions to an experienced mortgage lender who can help you navigate through the volatility. View the current mortgage rates in Rockland and Bergen County. 

The savings outweigh the costs - Another factor when determining whether to refinance or not is the cost associated with refinancing. This is part of the reason why experts suggest that you refinance when the current rate is at least 1% lower than your existing mortgage rate. You need to make sure that the costs associated with a mortgage refinance do not exceed the savings. The average cost of refinancing a mortgage can total between 3-6% of the loan’s principal. Refinancing is essentially taking out a new mortgage, so you are paying the same fees as when you took out your initial mortgage. 

Many experts agree that if you are not planning on staying in your home for more than a few years, the costs of refinancing outweigh the benefits.

Your credit score improved - This is another thing to take into consideration when deciding to refinance at a lower rate. If your credit score has greatly improved from when you purchased your home, you could be in a position to refinance at a lower rate. 

Consider refinancing a mortgage if you will save on interest and the savings outweigh the costs - Image of a person using a calculator

Ready to Refinance Your Home Loan? 

With mortgage rates near all-time lows, homeowners have more options than ever before. Refinancing can be a great way to lower your interest rate, reduce your monthly payments, shorten the length of your loan, and put money back in your pocket. If interest rates are significantly lower than when you bought your house, and you plan on staying in your home for a long time, and you want to lower your interest payments, you might be an excellent candidate for a mortgage refinance loan. 

If you have questions about home refinancing in Nanuet, Orangeburg, or New City, talk with a Palisades CU mortgage expert today! At Palisades Credit Union we strive to help our members finance the home of their dreams and understand that finding the right home and mortgage sets a solid foundation for successful homeownership. We can help you determine whether to refinance or not.  Contact us online or visit us in Nanuet, New City, or Orangeburg, New York. 

Palisades CU is federally insured by NCUA. Company NMLS # 784941. Equal housing opportunity. Serving Rockland and Bergen County. 

Have more questions or need a refresher on the home loan process? Here is everything you need to know about home loans. 

View current mortgage rates in Rockland and Bergen County.

Considering a refinance to remodel your home? Read more about how to pay for home renovations. 

« Return to "Blog" Go to main navigation
tr?id=944422258948976&ev=PageView&noscri tr?id=944422258948976&ev=PageView&noscri