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Since I have refinanced properties so many times, I decided to write about some of the reasons that people choose to refinance. Like me, you may find that refinancing could save tens of thousands of dollars in interest and years of mortgage debt repayment. Unfortunately, it does take some effort to get the process started and it’s not hard at all. However, the time and effort spent will easily be worth it depending on your situation. Here are some reasons that you may want to consider refinancing your home loan.

5 reasons you may want to refinance

Refinance to shorten the term of your loan. If you have a 30-year mortgage, now may be a great time to consider refinancing. With record low interest rates, you may find that a 15-year mortgage is not much more expensive than the 30-year loan payment you have been paying.

Start by entering your information into a mortgage calculator to see what your new payment might be. If your new estimated payment is feasible, consider contacting a mortgage professional. (When we first refinanced our home from a 30-year mortgage at 5 percent to a 15-year mortgage at 3.25 percent, our payment only increased by about $200. Since the increase fit easily into our budget, the decision was a no-brainer.)

Refinance to lower your interest rate.  As I mentioned before, interest rates are near a record low. And as I write this, 30-year mortgage rates are hovering above 3 percent and 15-year loans can be secured for an even lower rate. If your home is now financed at a higher interest rate, it may be a great time for you to consider refinancing. You could literally save tens of thousands of dollars just by taking the time to fill out the necessary paperwork and gather the needed documents.

Refinance to lower your payment. Refinancing your mortgage at a lower interest rate could mean drastically reducing your payment and saving tens of thousands of dollars in interest. Lowering your mortgage payment could also free up hundreds of dollars per month that could be saved or invested. Although refinancing to lower your payment could increase the term of your loan, it could make sense in your particular situation.

Refinance from an adjustable-rate mortgage to a fixed-rate loan. If you currently have an adjustable-rate mortgage, now may be the perfect time to refinance into a fixed-rate loan. Interest rates are low now, but they may not stay this low forever. Locking into a low, fixed rate can protect you from rising interest rates in coming years. Additionally, a fixed payment is easier to plan for and budget.

Refinance to cash out home equity. It’s a tempting proposition to cash out your home equity by refinancing your home. It could even be a great financial move in some circumstances. For instance, it may make sense to cash out some of your home equity in order to buy an investment property or start a business. It mostly depends on what you are trying to achieve and if you are someone who can manage your debts responsibly.

Can refinancing help you meet your goals?

Before refinancing, consider what your goals really are. Do you want to lower your monthly mortgage payment? Do you want to pay off your mortgage and get out of debt faster? Only you can answer these questions.

It is also important to take all closing costs and fees into consideration. Depending on which new loan you choose, you may have to pay thousands of dollars in fees for your new mortgage. It may take several years to recoup the costs of refinancing, and it is important to identify your breakeven point. If you plan on moving in the near future, it may not make sense to refinance your home loan at all.

Do you even qualify for a refinance?

Due to government-backed programs, you may be able to refinance your home even if you owe more than your home is worth. The Home Affordable Refinance Program, known as HARP, loosens requirements for traditional refinancing. According to, your loan must meet several requirements in order to qualify:

  • The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.

  • The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.

  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.

  • The current loan-to-value (LTV) ratio must be greater than 80%.

  • The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

You can check if your mortgage is owned by Freddie Mac here, and you can check if your mortgage is owned by Fannie Mae here.

Consider refinancing decisions carefully

There are many things to consider before refinancing your mortgage. Most importantly, you should weigh the pros and cons of your particular situation and act according to your own best interest. With some thorough research and planning, refinancing your mortgage could turn out to be the best thing for your family and for your pocketbook.

Have you considered refinancing your mortgage? If so, why did you decide to refinance? If not, why haven’t you?

Why Refinance?

Refinancing is the process of paying off your existing mortgage with a new mortgage. Typically, you refinance your mortgage to reduce your interest rate and monthly payment or change the length (or term) of your mortgage. You may also refinance to take cash out from your home’s equity.

  • Fixed Rates
  • Adjustable Rates (ARM)
  • Conforming Loans
  • Jumbo & Super Jumbo Loans
  • FHA, VA, & USDA Loans
  • Terms from 10 to 30 Years

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