Is Refinancing Your Mortgage a Smart Move?

Refinancing your mortgage can be a powerful financial tool, but it's not the right choice for everyone. It involves replacing your current home loan with a new one. Here are the main reasons homeowners choose to refinance:

1. To Get a Lower Interest Rate

This is the most common reason to refinance. If market rates have dropped significantly since you got your loan, refinancing could lower your monthly payment and save you thousands of dollars in interest over the life of the loan.

2. To Change the Loan Term

You might refinance from a 30-year to a 15-year mortgage to pay off your home faster and save on interest. Conversely, you could switch from a 15-year to a 30-year term to lower your monthly payments, freeing up cash for other needs.

3. To Tap Into Home Equity

A cash-out refinance allows you to borrow more than you owe on your current mortgage and take the difference in cash. This can be a good way to fund home improvements, consolidate high-interest debt, or pay for education expenses.

When Does Refinancing Not Make Sense?

Refinancing comes with closing costs, typically 2-5% of the new loan amount. If you don't plan to stay in your home long enough to recoup those costs through monthly savings (the "break-even point"), it may not be worth it. Additionally, if your credit score has dropped, you may not qualify for a rate that makes refinancing beneficial.

Before you decide, use our rate comparison tool and speak with one of our advisors to analyze your specific situation.