Should You Refinance Your Mortgage? Here's How to Tell
Refinancing replaces an existing mortgage with a new one, usually to get a lower rate, change the loan term, or tap into home equity. It isn't free, though, and running the numbers before applying can save from paying closing costs on a refinance that doesn't actually pay off. Common reasons people refinance Lowering the interest rate — if market rates have dropped meaningfully since the original loan closed, or if credit has improved enough to qualify for a better rate. Shortening the term — moving from a 30-year to a 15-year loan to pay it off faster and pay less total interest, usually in exchange for a higher monthly payment. Switching loan type — moving off an ARM before it adjusts, or out of an FHA loan to drop mortgage insurance once enough equity has built up. Cash-out refinancing — borrowing more than what's owed and taking the difference in cash, typically for renovations or debt consolidation, secured against home equity. Refinancing isn't free...