Refinancing Your Home Mortgage


Refinancing is when you replace your existing mortgage with a new loan. Why would someone need a new home loan? Well, some people choose to refinance when they want a lower monthly mortgage payment. Others might refinance to pay for costly repairs. Refinancing isn't always the best decision for homebuyers. Let’s take a look at some of the advantages and disadvantages of refinancing your home.

The Advantages of Refinancing

Reduce your monthly mortgage payment.

If you need to reduce your monthly mortgage payment, refinancing your home could be a good option. As you make payments on your house, the amount still owed on your home loan goes down.

Let’s say when you bought your house, you took out a 30-year loan for $200,000. After years of paying on the loan, you now owe $140,000. If you were going to refinance, you would only need a new loan for $140,000. What you currently owe on the house.

If you were to take out a NEW 30-year loan for the current amount owed, your monthly payment would be lower. Depending on interest rates, of course.

Reduce your interest rate.

Sometimes it makes sense to refinance your home to get a lower interest rate. Interest rates can and do, change over time. Today, your interest rate could be much lower than it was when you first took out your loan. A lower interest rate would lower your monthly mortgage payment.

Change the type of mortgage loan on your home.

If you currently have an adjustable rate mortgage, refinancing could help. Getting a new loan with a fixed rate, as long as the new rate is lower, could save you money each month. A fixed rate means you don’t have to worry about the interest rate going up over time. If your fixed rate is 3.5% today, it will still be 3.5% in 20 years.

Make needed repairs to your house.

Homeowners can also refinance their home to pay for repairs or maintenance on the home. How is that possible? Well, let’s say your home is worth $200,000 and you still owe $180,000 on your mortgage loan. You could refinance your home and take out a loan for $200,000. You would pocket that extra $20,000 and could use it on improvements to your house.

Downsides to Refinancing

There are a few downsides to refinancing your home mortgage.

When you refinance, you could be charged fees during the process. These fees could cost you several thousand dollars. You could spend more on paying fees than whatever you would save by refinancing.

Another thing to consider before refinancing is how long you want to pay on your mortgage. When you refinance, that could mean extending the length of your loan. For example, say you’ve been paying on your home for 10 years and decide to refinance with a 30-year mortgage. When it's all said and done, you’ll really be paying for 40 years on the same house.


Refinancing might be a good option for some homeowners. Maybe you want to decrease your monthly payment or get extra cash to make an expensive home repair. Make sure you talk with a professional lender before making any refinancing decisions. 

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