With mortgage rates changing so often, more and more people have been considering refinancing their home loans. A lower rate could come with many financial benefits, but home loan refinance isn’t something that should be done on a whim. Before moving forward with refinancing, you should consider what your end goals are.

If you do decide to refinance, a good credit union will be able to meet all of your needs. With lower rates than some other financial institutions, credit unions like Rivermark Community Credit Union offer members competitive rates, discounts, and a fast and easy pre-qualification process. If refinancing is the right option for you, a credit union can help you to take the next steps. In the meantime, here are a few questions you should ask yourself before you decide to refinance your home.

1. Why Do You Want to Refinance?

Understanding why you want to refinance your home loan is an important step to take before you begin the refinancing process. It could help you to better decide if it’s truly a good decision and one that you’re ready to make. The reasons people choose to refinance their loans vary, but knowing what your end goal is can help you decide if this is the right financial path to take.

The current interest rates being low is one reason people choose to refinance their home loans. Though this may seem like a great reason to refinance, it isn’t always the case. A lower rate may lower your monthly payment currently, but if you’re signing up for another 30-year loan at the wrong time, you could end up spending just as much, if not more, after your factor in those added years of interest and the cost of closing fees.

Speaking of lowering your monthly payment, minimizing a monthly payment is another popular reason to refinance. This is especially prevalent for people who have had a dip in their finances and can no longer afford to make the payments they made previously. In this case, it may make sense to refinance, as it can give you the time you need to get back on your feet and start making higher payments later on. Still, you should keep in mind that lower monthly payments could save you money now and cost you more in interest in the long run. The smaller your payments are, the less money you’re putting against the principal balance.

2. How Long Do I Plan to Stay in My Home?

The amount of time you plan to stay in your home is something you should definitely factor into your refinancing decisions. Paying off the loan is the goal for most people, but if you don’t plan on staying in your home for the duration of your loan, it may not make sense to refinance. Refinancing will essentially start your loan term over again to either a 15- or 30-year repayment plan. If you only have a few more years left in the home you’re currently in, you should probably hold off on refinancing since you won’t be paying off the home anyway.

Aside from the amount of time you plan to spend in your home in the future, you should also consider how much time you’ve already spent on your home. If you’ve already been paying off your loan for a significant amount of time and have 10 years or fewer left on it, you may not benefit from refinancing your loan. Refinancing will cause you to have to spend more time paying it off, making your total time between the two loans upward of 40 years of repayment. Though refinancing may lower your monthly payments, it will definitely add to your overall interest paid in this case.

3. Will You Qualify?

If you’ve decided that a home loan refinance is the right option for you, the next thing you’ll want to ask yourself is if you qualify. Potential lenders will look at things like your debt-to-income ratio and your credit score when they’re considering your application. To better your chances of securing a lower rate, you’ll want to make sure your other finances are in order.

Checking your credit score is a good thing to do before you apply for a home refinance and can be done for free through any of the three major credit reporting agencies. In general, a score of at least 620 is needed to qualify for refinancing. During this check, you can see if you have any outstanding bills you weren’t aware of and pay them off before you apply for home refinance loans. You can also take this time to pay off any smaller bills that you have so that your debt-to-income ratio is as low as possible. These small things can help to increase your chances of being approved for a refinance loan with a low-interest rate.

4. Can You Cover the Closing Costs

Just like when you applied for your initial loan, there will also be closing costs associated with your home loan refinance. You’ll often have the option to add those costs to the total loan amount, but this can cause them to be subject to interest. If your goal is to save money, paying for the closing costs up-front is the smarter decision. The amount of this cost will vary depending on the price of your home, but it will likely cost a few thousand dollars. If you’re not yet ready to put up the money for closing costs, it may be in your best interest to hold off on refinancing until you’ve had time to save a little.

5. Have You Shopped Around?

When you’re ready for a home loan refinance and are doing it for reasons that make sense to you financially, you should be sure to shop around. Financial institutions often offer different rates and customer perks that go along with joining their credit union or bank. Now that you have the opportunity to switch up who you bank with, you should make sure you make a choice you’ll be happy with for the next few decades.

Many people who choose to refinance their home loans choose to do so with a credit union. A credit union like Rivermark Community Credit Union can better meet the needs of their members because they’re a not-for-profit establishment. It’s what allows them to offer lower rates and provide even better customer service, which is important when you have to work with them for the next 30 years. Visit your local credit union when you’re shopping around to make sure you get the best deal possible.