Many American households save thousands on mortgage loans every year through refinancing. It can be challenging to determine the right time to refinance your mortgage in an ever-changing market, so if you’re considering a change, it’s wise to learn more about the process. Start by debunking a few common myths you’ll hear about refinancing mortgage loans.

What Do People Get Wrong About Mortgage Refinancing?

1. Savings Get Canceled Out by Closing Costs

Some homeowners decide not to refinance because they don’t want to pay closing costs. These are the expenses associated with getting a mortgage loan like lender fees, title costs, homeowners insurance.

While it’s true that refinancing involves closing costs, the savings you’ll enjoy month-to-month often far outweigh the costs of closing on your new loan. Your lender can walk you through the potential savings associated with refinancing your current mortgage and help you determine your closing costs on the new loan. 

2. Not Worth It Unless You Save 1%

You might hear that refinancing your loan isn’t worth it unless your interest rate is dropping by at least 1%. The truth is that even saving a fraction of that will accumulate over time and add up to a significant amount of money, especially if you have a large loan. Even a minimal amount of savings can be reinvested or used to offset other expenses.

3. You Should Never Use a Refinance to Consolidate Other Debt

There is some truth to this, but it is relative to your individual financial situation. If you are considering a cash-out refinance to pay off credit card debt, more than likely it’s because the monthly payments are creating some financial distress.

If you are at a point where you are struggling to make the minimum payments on high rate credit cards, a mortgage refinance could help. A $2,000 credit card balance with an 18% annual rate takes 370 months to pay off if you make the 2% minimum payment – that’s 10 months longer than a 30-year mortgage.

Carrying higher balances on revolving debt can cause your credit score to drop significantly. Because a mortgage is an installment debt, adding to the loan balance will not have the same negative impact that maxed out credit cards will. This could actually improve your credit score if you pay the cards off and keep the balances to a minimum in the future.

If you have questions about refinancing your home mortgage loan, trust the professionals at Armstrong County Building & Loan Association. With more than 90 years of service in Ford City, PA, this institution offers a range of products and services including home loans, construction loans, second mortgages, and home equity lines of credit. Take a look at the latest mortgage rates on their website and reach out to (724) 763-7137 if you’d like to speak with a representative.