Mortgage Refinancing: Is It the Right Move for You?

Mortgage refinancing can mean lower monthly payments and shorter loan terms, but it’s important to weigh current interest rates and closing costs, loan term, cash-out refinance, and financial situation carefully before making a decision.
Published on
August 14, 2023
Copy link

Mortgage refinancing involves paying off your existing mortgage and taking out a new one under different terms. Many homeowners are considering refinancing to lower their monthly payments or shorten their loan term, but is refinancing the right move for everyone? There are a few key factors to weigh when making this decision.

1. Current Interest Rate Versus New Rate

Really look closely at your current interest rate and how much you could potentially lower it by refinancing. Calculate exactly how much your monthly mortgage payments would decrease based on the new rate. For a $200,000 balance, going from a 4% to 3% interest rate could mean over $60 in monthly savings, which is significant. Run the numbers for the total interest savings over the life of the new loan as well. For instance, on that same $200,000 loan, you could save over $21,000 in interest over a 30 year term by refinancing at a lower rate. However, you have to factor in closing costs, which can run 3% to 6% of your total loan amount. Determine your break-even point - how long would you need to stay in the home for the monthly savings to recoup the closing costs? Make sure your timeframe aligns.

2. Loan Term

Shortening your loan term, say from 30 years to 15 years, can help you pay off your mortgage faster and build home equity more quickly over time. On a $200,000 loan at a 4% rate, going from a 30 to 15 year term would mean monthly payments of $1,264 instead of $954, an increase of $310 per month. While it requires a larger monthly payment, you save significantly on interest over the life of the loan. Carefully consider if the higher payments fit within your budget and lifestyle both now and in the future. Also factor in plans like retirement, college savings, etc.

3. Cash-Out Refinance

With a cash-out refinance, you can tap equity you’ve built up in your home for other financial needs. But you take on a higher loan balance and monthly payment as a result. For example, you may be able to take out $50,000 cash on a home valued at $300,000. This can be a tempting option, but only makes sense if you have a solid plan for the funds such as paying off high interest credit card debt or making necessary home improvements. Avoid the temptation to tap equity for discretionary purposes which could put your financial security at risk long-term.

4. Current Financial Situation

Take an honest assessment of your current and foreseeable future financial situation when deciding on refinancing. Have you been in your job/career long-term with stable income? Does your budget allow you to comfortably handle potentially higher monthly payments if you refinance? Do you have plans to move or change housing in the near future? Address concerns about long-term affordability now to avoid problems down the road. Refinancing may not be the best move if your financial situation could be in flux.


In summary, weigh factors like your new interest rate, loan term, plans for cash out, and overall financial picture when deciding if refinancing is the right move. Mortgage refinancing can be complex, so working with a trusted lender or financial advisor is recommended. While refinancing can certainly offer benefits like lowering your payments, it requires due diligence to determine if the benefits outweigh costs based on your individual financial situation and goals. Our team at Amres is here to help provide guidance tailored to your specific needs. Reach out today to start the conversation around whether refinancing is the right step for you.

This is not an offer or commitment to lend. The content in this advertisement is for informational purpose only.

Get started today
Whether you're actively looking, or just researching, you can find out what you qualify for and get connected with a pro.
Apply Now
Get Expert Guidance on Mortgage Refinancing
Unlock Savings Now! Fill out the form with your contact information and get connected with a trusted mortgage professional.
Take the First Step!
Latest posts

Don't Stop Here

Check out some of these related articles.

The Basics of Home Loans

Here's the inside scoop on home loans. From understanding down payments to finding the right lender, this quick guide will make you a pro in no time.
Read post
Four chairs with a balloon tied to each chair with a green circle on a green background

The Advantages of Home Equity Conversion Mortgages

Home Equity Conversion Mortgages (HECMs) can provide retirees with a number of benefits, including financial security, flexibility, and low fees and interest rates. HECMs allow homeowners who are aged 62 or older to convert their home equity into tax-free cash and do not require monthly repayments. HECM refinancing can also give access to the increased value of a property, financing for home improvements, and lower fees and interest rates. However, homeowners should be cautious when considering HECM refinancing and seek professional financial advice before making any major financial decisions.
Read post

Navigating Home Inspections: A Homeowner's Guide to Understanding and Utilizing Inspection Results

A home inspection is a critical part of the home buying process. This blog looks at what to expect during an inspection, how to pick an inspector, what an inspector examines, how to review inspection reports, and how to negotiate repairs with the seller. Learn more about home inspections with our resources page for buyers.
Read post