Why it’s smart to refinance your mortgage loan

By Hawaii Renovation Posted in: ImproveTips

Whether it’s helping their children move into their first home, making home improvements or paying for college, many homeowners find refinancing their mortgage a great solution to fund a variety of needs.

Quinn, Liane and Brian Hoole, Susan Maglaya and Sylvia Young.

Is refinancing for you? It depends on what your financial or personal goals are. If you are thinking of moving in a few years, it would not be wise to refinance. Or, if you have owned your home for a long time, it may be best to just let things ride out. You may end up paying more for your home in the long run if you refinance. But for many homeowners, refinancing is a great option to lower monthly payments and save money over the life of the loan.

There are four main reasons why people choose to refinance their mortgage loan, which include:

• Lower the interest rate. The mortgage interest rate is directly tied to your monthly payments. Lower rates usually mean lower payments and allow you to build equity in your home faster. A lower monthly payment can add up to a great deal of savings over the life of the loan.

Brian, Liane and Quinn Hoole, Sylvia Young and Susan Maglaya

• Adjusting the length of the mortgage loan. Many homeowners will refinance in order to decrease the term of their mortgage loan. A shorter-term loan will allow them to pay off the loan sooner, paying less in interest costs throughout the life of the loan. However, the monthly payment usually is a little higher. In other instances, homeowners may want to extend the length of the loan to reduce the monthly payment. It is important to consider that this change will increase the amount of interest paid over the life of the loan.

• Change from an adjustable-rate mortgage to a fixed-rate mortgage. In some instances, homeowners originally took advantage of an adjustable-rate mortgage (ARM), because the rate was lower than a fixed-rate loan. But with that ARM, they took the risk of the payments increasing or decreasing on a fairly regular basis. If you want a little more stability in your mortgage loan payment, a fixed-rate loan is a better option for you.

Liane, Brian and Quinn Hoole, Susan Maglaya and Sylvia Young.

• Getting cash out from the equity in your home. When you refinance for an amount greater than what you owe on your home, you can receive the difference in a cash payment, or what is referred to as “cash-out refinancing.” You can use this cash to pay for remodeling projects or other expenses. However, when you take out the equity of your home, you technically own less of your home, and it will take time to build it back up.

Are you eligible to refinance? Determining your eligibility for refinancing is similar to the approval process you went through previously. At HawaiiUSA FCU, the company will consider your income and assets; credit score and other debts; the current value of your property; and the amount you want to borrow. An improved credit score may qualify you for a lower rate. At the same time, if your home is not worth as much as what you owe on your current mortgage loan, refinancing may not be a good option right now.

To learn about the company’s current mortgage loan rates, or to start the refinancing process, visit its website at hawaiiusafcu.com, call 534-4300 on Oahu and toll-free at (800) 379-1300 or stop by any of its branches.

Photos: Anthony Consillio

HAWAIIUSA FCU
contact // 534-4300
address // 1226 College Walk