How Mortgage Refinancing Works: A Guide for Tennessee Homeowners
Thinking about changing your current Mortgage? Refinancing may be the right move. For many homeowners, it's a strategic way to adjust monthly payments, shorten a loan term, or use built-up equity. But understanding how Mortgage refinancing works is the first step. This guide covers what refinancing is, when it makes sense, and how to begin with confidence.
What Is Mortgage Refinancing?
Mortgage refinancing involves replacing your current home loan with a new one, typically to enhance your financial position. You might refinance to lower your interest rate, shorten your loan term, or switch from an adjustable-rate to a fixed-rate Mortgage. Some even refinance to tap into their home equity for significant expenses, such as renovations or debt consolidation.
With Family Advantage Federal Credit Union, you can explore local Mortgage refinancing options in Tennessee and the surrounding areas.
Benefits of Mortgage Refinancing
The benefits of Mortgage refinancing vary based on your financial goals. Here are some common advantages:
Lower Your Monthly Payment: A better rate or longer term can lower your monthly payment.
Pay Off Your Mortgage Faster: Refinancing into a shorter-term loan can help you build equity quicker and save on interest.
Switch Loan Types: Convert an adjustable-rate Mortgage into the stability of a fixed-rate option.
Access Your Home’s Equity: With a cash-out refinance, you can use your home’s value to fund major expenses.
Eliminate Private Mortgage Insurance (PMI): If your home value has increased, refinancing may help remove PMI earlier than expected.
Family Advantage FCU helps members in Middle Tennessee evaluate these benefits with trusted, local guidance.
How Mortgage Refinancing Works (Step-by-Step)
Here’s how the Mortgage refinancing process typically unfolds:
Evaluate Your Current Loan: Look at your current interest rate, loan term, and how long you plan to stay in your home.
Check Your Credit & Financial Health: Your credit score, income, and debt-to-income ratio affect your refinance options.
Compare Refinance Options: Choose the right loan type—rate-and-term or cash-out—and consider working with a credit union that puts your needs first.
Apply for the New Mortgage: Once you’ve found the right option, submit a refinance application.
Home Appraisal & Underwriting: Most lenders will require a home appraisal. Your new loan is underwritten and reviewed.
Close on Your New Loan: After approval, you’ll close on the refinance and begin payments on the new Mortgage.
With Family Advantage FCU, members receive clear communication and straightforward guidance at each step.
Types of Refinancing to Consider
Rate-and-Term Refinance: Adjust your loan to a new rate, a different term, or both.
Cash-Out Refinance: Borrow more than you owe and take the difference in cash—ideal for renovations or large expenses.
Streamlined Refinance: A faster process for qualifying government-backed loans (not currently available through FAFCU).
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What to Know Before You Refinance
While refinancing offers many advantages, it’s important to weigh the costs and timing:
Closing Costs: Just as with your original Mortgage, refinancing involves fees.
Break-Even Point: This is the time it takes for your savings to offset the fees.
How Long You’ll Stay in Your Home: If you plan to move soon, refinancing may not make financial sense.
Current Market Rates: Refinancing is most beneficial when interest rates are lower than those of your existing loan.
Is Now the Right Time to Refinance?
The right time depends on your unique situation. Refinance if you’re:
Holding a higher interest rate than the current market options
Planning to stay in your home for several more years
Looking to reduce financial pressure or meet new goals
Ready to build equity faster with a shorter term
If this sounds like you, Family Advantage FCU is ready to help guide the process.
Your Path Forward
Now that you understand how Mortgage refinancing works and the potential benefits it can bring, the next step is to evaluate whether it aligns with your long-term financial goals. Working with a local credit union like Family Advantage FCU gives you the personalized support and community-based trust you won’t find with large lenders.