Should I refinance my mortgage?

should i refinance my mortgage

There are many reasons and/or benefits to refinancing a mortgage.  Some of those benefits may be lowering your interest rate, converting your mortgage from an adjustable rate to a fixed rate, eliminating private mortgage insurance, shortening the term of the mortgage and paying off the house quicker, or consolidating higher interest debts.  In a market where the interest rates are dropping and house prices are increasing, several of these benefits can be achieved.   If you have the ability achieve any of those, this is the time to refinance.


How do I know if I should refinance?

In order to answer this question, there are many things to consider. The first question to answer is how long you anticipate being in your house. If you plan to stay in your home for several years and you can recoup the cost of refinancing in a reasonable amount of time, it is worth it.  Once you have a general idea as to how long you will be in your house, the next step is to determine the break-even point.  This is calculated by dividing your savings by the cost to refinance.  For example, if you are able to save $100 per month and the costs are $3000, your break-even point is 30 months.  Normally, if you can break-even within three or four years, it makes sense to refinance if you are planning on staying longer than that timeframe.  However, if you think there is a chance you will move near the break-even point, refinancing may not be the best decision since your closing costs are added to the loan amount.  There are many different philosophies about how much you need to save (1% or 2% on your interest rate), but the loan amount is a significant factor in determining how much you should save in interest to make it worthwhile.  A savings of 0.5% on a $500,000 loan would we worthwhile but a 1% savings on a $100,000 loan probably would not.

If you expect to stay in your house for a long time, refinancing your mortgage is usually a good idea. Shorter loan terms and lower interest rates start to pay off quickly! It is wise to use the money you save from refinancing to help you manage your monthly expenditures, pay off your mortgage faster, and save for retirement. Everyone’s goal should be complete financial freedom by being debt free as soon as possible.

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Is it a good time to refinance my mortgage 2021?

It’s critical to your financial success to know when to refinance your current mortgage.  With rates being near all-time lows, if you haven’t spoken to someone about refinancing and you are able to benefit from some of the things discussed earlier, this is a good time to refinance.  A lower interest rate also allows you to build equity in your home faster and build wealth.  Talk to a local lender as soon as possible to determine your break-even point so you can make a wise decision.

When should you not refinance?

With mortgage rates reaching historic lows, many people have already refinanced. If you own a home and haven’t refinanced, you might be wondering if now is the right time to refinance your loan. It is absolutely something to consider sooner, rather than later.  Rates have been trending upwards, so now is the time to make the decision. But, the costs of refinancing can be substantial, especially with many online companies.  Many Lenders can roll excessive fees into the loan amount to make it appear as if you are refinancing for free, but the extra costs can extend your break-even point to five or more years.  So, make sure the costs don’t eliminate the benefit.

How many times can you refinance?

The number of times you can refinance a mortgage is technically unlimited. However, you may be required to wait a set amount of time between refinances in some situations. More than anything, you’ll want to make sure that refinancing your mortgage on a regular basis makes sense. It may not be a wise choice if your new interest rate isn’t significantly lower than your present rate. What is the explanation for this? Refinancing comes with closing expenses that can range from 3% to 5% of the new loan amount. As a result, you’ll need to be sure that the loan’s monthly savings justify the expenditure.

There are distinct standards for government-insured mortgages. Homeowners with an FHA loan who want to undertake an FHA streamline refinance must wait 210 days (seven months) from the first mortgage closing date and six months from the first mortgage payment due date before refinancing. There is a six-month payment requirement for an FHA cash-out refinance.

Likewise, homeowners with a VA loan who want to refinance their loan (known as an Interest Rate Reduction Refinance Loan, or IRRRL) must wait 210 days from the date of their first mortgage payment or the date of their sixth mortgage payment, whichever comes first. The statutory waiting period for a VA cash-out refinance is also at least 210 days from the first mortgage’s closing date.

For more information about if this the right time to refinance, contact the Cain Mortgage Team.


The Investopedia Team (June 30th, 2021). When to Refinance Your Mortgage

Molly Grace (August 9th, 2021). Reasons Not To Refinance Your Home

Peter Lazaroff | Forbes (February 27th, 2021). Should You Refinance Your Mortgage Before Rates Go Higher?

Ramsey Solutions (August 25th, 2021). Should I Refinance My Mortgage?

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