Mortgage rates are down again, prompting many to consider refinancing their homes. If you are in the market for a new and improved mortgage, here are some things to consider:

• You can save a lot of money in monthly payments and total interest. As an example, if you had an existing loan amount of $300,000 and 25 years left on a 30-year fixed loan at an Annual Percentage Rate (APR) of 5.875%, and you refinanced to a 30-year fixed loan at an APR of 4.750%, you could potentially save more than $57,700 in interest and $505 a month in payments!* Even if you paid $2,000 in closing costs, you’d still have a net savings of more than $55,700.
• Did you pick the right kind of mortgage? If you’re in an Adjustable Rate Mortgage (ARM) that could adjust to an uncomfortably high interest rate, refinancing now to a low-rate, 30- or 15-year fixed mortgage could give you peace of mind. If you don’t plan to be in your home very long, consider taking advantage of a new Adjustable Rate Mortgage with lower rates and lower monthly payments.
• You could save considerable interest and be debt-free sooner by refinancing to reduce your loan term.
• You may be able to stop paying Private Mortgage Insurance (PMI) if a new appraisal shows that you have 20% or more equity in your home. Be cautious though if you suspect your home has lost significant value in the recent recession, as you could find yourself below the 20% equity mark and paying PMI all over again.
• You may be able to consolidate multiple loans into a single loan, or take a cash-out to pay off high-interest credit cards. You may even be able to reduce your taxable income, as the interest on a mortgage is often tax-deductible, compared to the interest on a credit card, which isn’t.**
• You can access your available equity and add that deck you’ve been dreaming of or remodel your kitchen or go on that dream vacation you’ve only talked about – all at a great rate. 
• The higher your credit score, the better rate you may qualify for. Pull your credit history and consider paying to find out your credit score from myfico.com. If your score looks a little challenged (below, say, 720), you might want to see what you can do to quickly raise that score; just remember that substantial increases in your credit score will take time and commitment.

If you believe the time may be right for you to refinance your home, contact Salal for assistance. We have worksheets and calculators to help you determine how much you can save. Rates may soon be on the rise again, so don’t miss out on near-historic lows!

*This example is for illustration only and does not represent rates offered by Salal CU. All Salal loans are subject to credit approval. **Please consult a tax adviser for further information regarding the deductibility of interest.

Filed under: Financial News and You, Money management tips by admin