Jun 10, 2020 / Home Equity
At Utah First Credit Union, we know Utah homeowners often wonder, “When is the right time to refinance my home?” Refinancing can be a savvy move if it aligns with your financial goals – whether that’s saving money on your monthly payment or tapping into your home’s equity for a big project. The answer is different for everyone, but there are common indicators that can help you decide. Use this friendly checklist to see if refinancing makes sense for you.
If current mortgage rates are lower than what you’re paying, refinancing could reduce your monthly bill and put extra cash in your pocket. Even a drop of 1% in your interest rate can make a meaningful difference in your payment – and a larger drop (say 2%) could save you hundreds of dollars each month. Lower payments mean more breathing room in your budget for other needs or savings goals. Just be sure to factor in closing costs to ensure the refinance truly saves you money in the long run.
Maybe you want to pay off your mortgage sooner. Refinancing from a 30-year to a 15-year loan can help you become mortgage-free faster and save you a lot in interest over the life of the loan. Shorter-term loans often come with lower rates and will dramatically cut down the total interest you pay. The trade-off is a higher monthly payment, so double-check that your budget can comfortably handle the increase. If it can, the long-term savings might be well worth it!
If your loan’s interest rate can change in the future, you might be uneasy about the possibility of rising payments. Converting an ARM to a fixed-rate mortgage through refinancing can give you stability and peace of mind. You’ll lock in a rate that won’t change, resulting in a predictable monthly payment. Utah First often helps homeowners refinance to fixed loans, especially if interest rates are expected to climb or if you simply prefer the certainty of a fixed rate.
For homeowners with significant credit card or other high-interest debt, a cash-out refinance could be a game-changer. This means you refinance for more than you owe on your home and use the extra cash to pay off those debts. Essentially, you’re replacing high-interest bills with one lower-interest mortgage payment. It can simplify your life (one payment instead of many) and potentially save money on interest.
Important note: After consolidating, avoid running up new credit card balances – the goal is to stay debt-free, not start the cycle over! As with any refinancing, you’re using your home as collateral, so make sure it’s a move that fits your overall financial plan.
Home values in Utah have risen dramatically in recent years (statewide appreciation is roughly 55–60% since 2020), so you might be sitting on more equity than you realized. If you need funds for something big – like a home renovation, college tuition, or starting a business – a cash-out refinance lets you borrow against that equity. You’ll get a lump sum of cash to use for anything you want, from finishing your basement to investing in a rental property. The good news is mortgage rates are usually lower than credit cards or personal loans, making a cash-out refinance one of the cheaper ways to finance big expenses. Just remember that your loan balance will increase with a cash-out refinance, so your monthly payment might go up accordingly. Consider whether the new payment is manageable and if the investment you’re making with that cash is worth it.
Refinancing isn’t free – you’ll have closing costs, typically 2–5% of the loan amount. A smart refi decision comes down to weighing those upfront costs against your monthly savings. The break-even point is how long it takes for your savings to exceed the 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 stay in your home well beyond that, great! But if you might move in a year or two, refinancing might not pay off. Ask yourself how long you intend to stay in your home – if it’s only a short time, you may decide to hold off on refinancing. Utah First can help you calculate this break-even point so you can make an informed choice.
Refinancing can be a powerful tool to lower costs, build equity faster, or unlock cash when you need it. The key is making sure it aligns with your goals and financial situation. If you found yourself mentally checking any of the boxes on this Utah homeowner’s checklist, it might be time to take the next step. Reach out to Utah First for personalized refinancing advice tailored to you. Our friendly mortgage specialists are here to answer your questions, walk you through the numbers, and help you explore current rates and loan options. Every homeowner’s situation is unique – and at Utah First, we’re committed to helping you make the best decision for your family. Give us a call or stop by one of our branches to chat about your refinance goals. We’re excited to help you save money and make the most of your Utah home!