Reasons to Refinance

Refinancing loans is a topic that is often discussed, but what exactly does it entail and how can it be advantageous for you? Let’s explore some of the ways refinancing could be the best decision for your financial situation.

Reason 1: Lower Interest Rate

Lowering your interest rate is one of the most impactful benefits of refinancing a loan. It could be due to an improved credit score or a decrease in interest rates, but if the opportunity for a significant reduction arises, it’s worth exploring. A lower interest rate could lead to substantial savings in interest payments over the loan’s life, resulting in long-term financial benefits.

Reason 2: Lower Monthly Payment

If you find that your current monthly loan payment is causing financial strain, refinancing may be the solution. One way to lower your monthly payment is by choosing a longer term on a lower loan amount. For instance, say you took out a $300,000 mortgage for 30 years but have since paid off $100,000. If you refinance with another 30-year loan, you can spread the remaining $200,000 payments over a longer period, making your monthly payment more affordable.

Reason 3: Shorter Term

Refinancing your loan to a shorter term not only saves you money on interest in the long run but also allows you to pay off your loan faster. For instance, the difference in total interest between a 15-year mortgage and a 30-year mortgage is significant. Typically, 30-year mortgages come with higher interest rates and require you to make payments for twice as long, allowing interest to accrue. Refinancing to a 15-year option allows you to save money and pay off your loan quicker.

However, keep in mind that a shorter mortgage term also means a higher monthly payment. If refinancing doesn’t significantly change your interest rate, making larger monthly payments on your own could be just as effective.

Reason 4: A New Type of Loan

Refinancing gives you the opportunity to switch to a different type of loan that better aligns with your financial goals. Say, for instance, you started with an adjustable rate mortgage but now want a more stable option. Refinancing to a fixed rate mortgage could be the perfect solution. With Northeast Credit Union, you can explore your options and find the loan that’s right for you.

If you are looking to see if refinancing your mortgage makes sense for you learn more about how Northeast Credit Union may be able to help!