Spring Clean Your Mortgage

Refinancing could save you money.

By: Jocelyn Wood | Category: Financial Services | Issue: March 2013

RCB Bank Loan Officer Jenalee Mitchell recently helped a customer save $210 a month on their loan payments and reduce their total interest by almost $46,000 over the life of the loan.

When is the last time you reviewed your mortgage statement? Could a refinance save you money? RCB Bank loan officers Jenalee Mitchell, Robin Brown and Michael Banham answer questions to help determine if refinancing is a money-wise decision for you.

How often should I review my mortgage?
Every three years, unless you have an adjustable rate (ARM), says Jenalee Mitchell of Claremore. “In that case, review annually. Rates are lower than they’ve ever been. If you have an adjustable rate mortgage, don’t risk an increase when your rate period is set to adjust; now is the time to lock in a fixed rate.”

What should I be looking at?
Review your interest rate, term of loan, adjustable rate or balloon payments, if any, and your home’s current appraised value, says Mike Banham of Owasso. “With a lower interest rate, it’s possible to reduce your term, thus saving you money by reducing interest costs over the life of your loan, and have the new payment still be close to your existing payment.”

Also, when reviewing your mortgage, you should determine what you want to accomplish, says Robin Brown of Broken Arrow. “Is your goal to lower your monthly payment, shorten your mortgage term or get cash from the equity built up in your home? Once you decide what you want to accomplish, then you can determine if refinancing is right for your personal financial goal.”

When should I consider refinancing?
If the current interest rate is 2% lower than your current mortgage loan rate, it may be cost effective to refinance, says Jenalee. “Keep in mind, you have to also consider the balance owed on your current mortgage and how long you plan to be in your home. How long will it take to recover closing costs?”

Other reasons to refinance include to lower your loan costs and shorten the term of your loan; lower your monthly payments and use the savings for other items in your budget; convert adjustable rates to a fixed rate; or raise cash, using your equity for home improvements or to pay off debt.

When is refinancing not a good idea?
If you plan to move in the next few years, or if your home value has decreased, refinancing may not be the best solution, says Mike. “It takes about three to four years to recoup the closing costs for a refinance. Also, if your home has lost value, a refinance may cause you to pay PMI (private mortgage insurance) or a higher PMI than on your current loan. Be careful, as upfront mortgage insurance has doubled for FHA loans in the last 18 months.”

Another reason to pass on refinancing is if you’re close to paying off your loan, says Robin. “Once a customer is within 10 years of paying off their loan, typically more of the payment is going towards principal and it isn’t feasible to refinance (unless you can see closing costs will be recouped).”

What do I do if I want to refinance (or don’t know)?
Talk with an experienced loan officer who can help you decide if refinancing is a money-saving opportunity for you, says Mike. “Ask questions. Ask for your best options and compare programs.”

It’s important to find a lender you can trust, adds Robin. “For instance, here at RCB Bank we don’t pressure our customers. Together, we’ll discuss your goals and examine options to find the best possible solution for your financial needs, at no obligation.”

How long does the process take?
On average, the loan process, from the initial application until the loan is closed, takes about 30 to 45 days, says Robin. “The most important key is good and open communication between you and your loan officer. At RCB Bank, our customers are important to us. It is our goal to keep you informed during the refinance process and work with you to make it as easy and comfortable as possible.”

If you want help reviewing your mortgage to see if refinancing is the smart money-saving decision, we invite you to visit any RCB Bank branch location and speak with a loan officer. You can also call 855-BANK-RCB and ask to speak to Jenalee, Mike or Robin.