We’ll be the first to agree that interest rates are the driving force behind home refinancing. However, there are several other factors—such as your own priorities, financial goals and long-term life plans—that also need to go into a big decision like refinancing your home.

Why refinance?

Refinancing a mortgage means replacing an existing mortgage with another one under different terms. Homeowners may refinance their home (or any kind of loan, for that matter) for many different reasons. Some homeowners are looking to lower their interest rate. Others want to consolidate other debt into a single payment or a longer term. And some people may need to access equity for making home improvements or paying tuition fees for their children’s education.

A closer look at rates

When rates are going down, borrowers may consider refinancing to a lower interest rate in order to decrease their monthly mortgage payment or shorten the term of the loan while keeping the monthly payment amount the same. It may also be an opportune time to look at pulling out equity for home improvements (like renovations and upgrades), which could ultimately increase the value of your home.

When rates are rising, borrowers who currently have an adjustable rate mortgage or a HELOC may want to lock in a rate to avoid paying even higher rates in the future. Some people have better peace of mind knowing exactly what their interest rate will be, no matter the rate environment.

Sometimes, higher cost credit card debt can also be refinanced into a new mortgage, helping customers with their month-to-month expenses. It may also be worth refinancing to a higher rate if you can extend your term or consolidate other debt to lower monthly payments. Refinancing to make improvements can also make sense even if the rate is a little higher. The increased value of your home may offset that higher rate.

Assess your options

Know that closing costs will vary with the type of refinance you choose. A full appraisal and the title work for a first mortgage may make refinancing an expensive solution for some borrowers. In that case, a Home Equity Loan may be the right solution. Be sure to talk to your lender about which option is best for your situation. There is no one-size-fits-all strategy.

If you’re interested in refinancing your home, or you’d simply like to learn more about your options, please get in touch. Your lender will talk to you about your unique objectives, what a refinance would accomplish, and how you can meet your financial goals.

By Jane Merrill, Vice President, Senior Retail Loan Officer, Camden National Bank

(207) 593-7228

Jane brings over 20 years of lending experience to help customers find the best loan for their needs. Whether you are buying a home, building or refinancing, she will work with you to ensure that the process moves as smoothly as possible, from pre-qualification to closing. Jane helps customers with mortgages, construction loans, refinancing and home equity. Jane grew up in the Bronx, New York, and she currently lives in Camden with her husband. She’s a past president and current member of the Rockland Kiwanis Club and Penobscot Bay Regional Chamber of Commerce. She’s involved with the Midcoast Board of Realtors and was Affiliate of the Year in 2007 for the St. George River Council. She’s also past chair of the Midcoast Chapter of the Maine Women’s Network.