Jan 10, 2024 / Uncategorized
If you’re a Utah homeowner, you’ve probably asked yourself at some point, “When is the right time to refinance my home?” Totally fair question, and the answer is different for everyone. Refinancing can be a super savvy move when it fits your life, goals, and timing.
Whether you’re looking to lower your monthly payment, pay off your home faster, or put your hard-earned equity to work on something awesome, refinancing isn’t one-size-fits-all. But good news! There are several indicators that can help you decide when refinancing your home makes sense (and when it doesn’t) — and we’ve compiled them into a refinancing checklist for you below!
Use these questions as a self-assessment to see if refinancing could be a win for you now or down the road.
Refi Readiness Questions to Consider
When rates dip below what you’re paying now, a refi can shrink your payment and put extra cash back in your pocket. That’s cash you can put toward your savings, paying down other debt, or just enjoying more flexibility.
Here’s how easily even a small rate drop can add up:
Just remember that refinancing isn’t free. Closing costs come with the territory, so make sure the long-term savings will be greater than your upfront expenses. If they are, you can lock in your new loan terms knowing you’re set up for success!
If the idea of being mortgage-free earlier in life makes you smile, refinancing into a shorter loan term could help you get there sooner. Switching over to a 15-year loan from a 30-year loan can slash the amount of interest you pay over time.
Why Utah homeowners do it:
The catch? Monthly payments usually go up. Refinancing to a shorter term is best if your budget can comfortably handle the jump over the long term.
If you’ve got an adjustable-rate mortgage (ARM) and are tired of wondering what your payment will look like when rates change, refinancing to a fixed-rate mortgage can bring you serious peace of mind.
Switching from an ARM to a fixed-rate mortgage through refinancing means:
If predictability sounds better than suspense, this might be your move.
Whether rates are about to climb or you just want peace of mind, our friendly team is always here to help you refinance to a fixed-rate loan when it makes sense for your life!
If high-interest debt is putting stress on your budget, a cash-out refinance can help you roll multiple payments into one (usually) lower-interest mortgage payment.
This means you refinance for more than you owe on your property and use the cash leftover to pay off those debts, replacing high-interest bills with one lower-interest mortgage payment.
Keep in mind that debt consolidation only works if you don’t run those balances right back up. The goal is to stay debt-free, not start the cycle over! You’re also using your home as collateral, so make sure it’s a move that fits your overall financial plan.
If you’ve owned your home for a while, there’s a good chance you’ve built more equity than you realize (Utah home values have been on a crazy upward trajectory!). A cash-out refinance lets you turn some of that equity into cash for bigger expenses like:
Mortgage rates are usually lower than credit cards or personal loans, which can make this a more affordable option — as long as the new payment still fits comfortably in your budget, of course!
When you refinance, your closing costs will run you between 2% and 5% of the loan amount. Before you refi, it’s wise to weigh those upfront costs against the potential monthly savings, so you know you’ll benefit.
An easy formula to remember:
The “break-even point” is the time it takes for your savings to exceed your costs. For example, if you spend $5,000 in closing costs and save $200 a month by refinancing, it’ll take about 25 months to break even.
If you plan to be in your home longer than that break-even window, refinancing could pay off nicely. If a move might be around the corner, it may make sense to wait. Not sure? Our financial experts have your back!
Ready to Explore Your Refinance Options?
If a few of these questions had you nodding along, it might be time to run the numbers and see what’s possible. Refinancing can lower your payment or speed up your payoff if the timing’s right. Only one way to know for sure!
Reach out to Utah First today. Our local mortgage team will break it all down, answer your questions, and help you figure out if refinancing makes sense right now.
Give us a call, stop by a branch, or start online. Worst case scenario: you get clarity. Best case? You save money!