Home Refinancing Explained

May 7, 2019, 14:24 PM by Nuvision Credit Union  

There’s a lot of good reasons to refinance your home. It can help you reduce your monthly payment, pay off your home earlier, or consolidate debt. Still, refinancing isn’t the best option for everybody. Make sure you know why you want to refinance before you do, otherwise you might end up making a costly mistake.

What does it mean to refinance?

Refinancing replaces your current loan with a new one, which pays off the debt owed on your old loan. Under the new loan, you’ll work out and agree to a new set of terms. Everything from the interest rate, to the length, to the amount borrowed could change, depending on what you’re looking for.

Why you might consider refinancing

A lot can change in a few years, and the terms you agreed to when you initially borrowed the money just might not be working anymore. Maybe the monthly payments have become too expensive, or maybe your credit has improved, and you now qualify for a better interest rate. Whatever the reason—it’s worth doing your researching and understanding your options.

The benefits

  • Lower your monthly payment – This happens in one of two ways. You can either extend the time of the loan, or get a lower interest rate. Both of these options should reduce your payment, but the one you choose will depend on your situation.
  • Save money – If you refinance with a shorter-term loan, you’ll pay less towards interest over the lifetime of the loan. Finding a loan with a lower rate could also save you money, provided you keep the same loan term.
  • Consolidate debt – This is an attractive option for people with multiple loans because it makes payments more manageable and easier to track. Consolidating your loans also comes with the possibility of tax benefits. And, if you secure a lower rate, you could save money.
  • Reduce your risk – If you currently have an adjustable rate mortgage, changing to a fixed-rate can lower your risk when the market shifts.
  • Get cash now – A cash-out refinance allows you to take cash out of your equity, the amount you’ve already paid towards the loan. This can be helpful when you’re considering renovations or need repairs on the home, but don’t have enough money to cover it out-of-pocket. 

The drawbacks

You probably wouldn’t want to do something that just wastes your money, so before jumping headlong into the process, take a step back and consider how it could affect you.


  • Additional fees – Yes, you already paid all those fees on your original loan, but taking out a new loan means you have to pay them again. Remember: this is a new loan with new terms. Your new lender will expect you to pay for credit checks, legal documents, and any other fees they charge for their loans.
  • Paying more – A lower monthly payment doesn’t always mean saving money. In fact, you might end up paying more money in the long run. When you stretch the payment out over a longer time, you pay more towards interest. What saves you money now could cause you harm down the line. All in all, think long term before you make the decision, and don’t just focus on the moment.

How to start the process

Once you’ve done your research and decided if refinancing is the best choice for you, you’ll go through many of the same steps you did when you took out the original loan on your house. Look into what lenders are offering, learn the current value of your home, and understand your best options. Make sure your credit score is good, if it isn’t, take steps to improve it.

Nuvision has a number of experienced individuals who can help guide you through the process. We’ll help you figure out which of our competitively priced loan programs makes sense for you.

If you’ve already made the decision to refinance, you can apply for your mortgage loan today. Otherwise, click here for more information or to contact one of our mortgage experts.