Coronavirus (COVID-19) 5 Reasons to Refinance Your Mortgage Read the Article Open Share Drawer Share this:Click to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Click to share on Tumblr (Opens in new window)Click to share on Pinterest (Opens in new window)Click to share on LinkedIn (Opens in new window) Written by Dan Miller Published Nov 11, 2020 - [Updated Apr 5, 2023] 4 min read Advertising Disclosure The views expressed on this blog are those of the bloggers, and not necessarily those of Intuit. Third-party blogger may have received compensation for their time and services. Click here to read full disclosure on third-party bloggers. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. Intuit does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. After 20 days, comments are closed on posts. Intuit may, but has no obligation to, monitor comments. Comments that include profanity or abusive language will not be posted. Click here to read full Terms of Service. Stop me if you’ve heard this one before — mortgage interest rates are at an all-time low. For what seems like the past 10 or 15 years mortgage rates have been dropping. Every time they reach a new low, everyone thinks “Wow, I need to refinance — rates will never be this low again!” And time and time again, rates continue to drop. If you’re thinking about refinancing your mortgage, here are five reasons you should consider it. #1 To get a lower interest rate Even if you’ve refinanced relatively recently, you might still be well-served by refinancing again, even if you’re still in the same house. With rates having continued to fall, refinancing again can lower your interest rate which will likely lower your monthly payment. That extra money each month can be put to good use by paying off debts or starting an emergency fund. #2 To shorten your mortgage term Another good reason to refinance your mortgage is to shorten your mortgage term. Each year that you are still paying off your mortgage is a year that you are paying thousands of dollars or more in interest. Going from a 30-year to a 15-year mortgage can save you tens if not hundreds of thousands of dollars of interest over the course of the loan. Decreasing the term of your mortgage will raise your monthly payment, due to the fewer number of total payments your loan will have. But rates on a 20-year mortgage are typically lower than those for a 30-year, and 15-year rates are usually even lower still. So the lower interest rates will often offset the increase from decreasing the term, keeping your monthly payment amount around the same. Use our free loan calculator to crunch the numbers and see what makes the most sense for you. Make sure to include the fact that refinancing does come with some up-front costs, which you’ll need to pay out of pocket or roll into your loan. #3 Get rid of PMI Another great reason to refinance your mortgage is to get rid of private mortgage insurance, or PMI. PMI is often used when you have less than 20% equity in your home. If you are still paying PMI and your home’s value has gotten to the point where you now have more than 20% equity, it can make sense to refinance in order to stop paying PMI in addition to your regular monthly mortgage payment. #4 To convert out of an adjustable-rate mortgage (ARM) Another reason to refinance your mortgage is if you currently have an adjustable-rate mortgage (ARM). An adjustable-rate mortgage is one whose interest rate can vary over time. With rates so low, it may make sense to lock in a low fixed rate so you don’t have to worry about interest rates going up in the future. #5 To tap into your home’s equity If you have a significant amount of home equity, you may be considering using some of that equity in other areas of your life. While it’s not a good idea to take the value of your home equity on a weekend trip to Vegas, there are many reasons you might want to tap into your home’s equity. This could be to make large home improvements, pay for higher education, pay down debts or other large expenses. One way to do this is through a cash-out refinance. In a cash-out refinance, you refinance into a loan with a HIGHER loan principal amount. After paying off the balance of your existing home mortgage loan, you can use the rest for whatever reason you want. Another option for getting cash from your home’s equity is a home equity line of credit (HELOC). A home equity line of credit achieves many of the same aims as a cash-out refinance, but does it in a slightly different way. Check out our article comparing the two to see which might be right for you. READ MORE: Home Equity Loan Vs. Cash-Out Refinance One reason not to refinance your mortgage Just because you CAN refinance your mortgage doesn’t always mean that you should refinance your mortgage. Generally speaking, it’s not a great idea to refinance your mortgage only to lower your monthly mortgage payments. Lowering your monthly mortgage payments is often a side-effect of refinancing, but unless you have one of the reasons we mentioned above, it might not be a great idea. There are two reasons why refinancing your mortgage solely to lower your monthly payments might not make sense. First of all, the extra closing and other costs that you pay with a refinance can add thousands of dollars to your principal amount. Then there’s the fact that lowering your monthly payments often means EXTENDING the term of your loan — you might end up paying tens of thousands of dollars more in interest. Previous Post Guide to Refinancing a Home Loan Next Post Home Construction Loans: How They Work Written by Dan Miller Dan Miller is a freelance writer and founder of PointsWithACrew.com, a site that helps families to travel for free / cheap. His home base is in Cincinnati, but he tries to travel the world as much as possible with his wife and 6 kids. More from Dan Miller Follow Dan Miller on Facebook. Follow Dan Miller on Twitter. Browse Related Articles Mint App News Intuit Credit Karma welcomes all Minters! Retirement 101 5 Things the SECURE 2.0 Act changes about retirement Home Buying 101 What Are Homeowners Association (HOA) Fees and What Do … Financial Planning What Are Tax Deductions and Credits? 20 Ways To Save on… Financial Planning What Is Income Tax and How Is It Calculated? 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