Should I refinance?

Is It Time to Refinance Your Home? Key Signs to Look For

Refinancing can be a smart financial move—lowering your payment, reducing your interest rate, or helping you tap into equity—but it isn’t always the right choice. If you’re wondering whether now is the time to refinance your home, here are the key factors to consider.

1. Interest Rates Have Dropped

One of the most common reasons to refinance is securing a lower interest rate. Even a 1% drop can make a meaningful difference in monthly payments and total interest paid over the life of the loan.

Rule of thumb: If you can lower your rate enough to recover your closing costs within 2–3 years, refinancing may be worth it.

2. Your Credit Score Has Improved

If your credit has strengthened since you originally bought your home, you may now qualify for a better loan program or a lower rate. Lenders reward higher credit scores with better terms, so refinancing could save you significantly.

3. You Want to Shorten (or Extend) Your Loan Term

Refinancing can help you:

• Pay off your home faster with a shorter loan term (like switching from a 30-year to a 15-year mortgage)
  
  
• Lower your monthly payment by extending the term
  
  

Shorter terms can save tens of thousands in interest but often come with a higher monthly payment—so it’s important to run the numbers.

4. You Want to Tap Into Your Equity

A cash-out refinance allows you to borrow against your home’s equity, which can be helpful for:

• Home improvements
  
  
• Debt consolidation
  
  
• Major expenses like education or medical costs
  
  

Just remember: tapping equity increases your loan amount, so be sure the long-term financial benefit outweighs the added debt.

5. You Need to Remove PMI

If you bought your home with less than 20% down, you may still be paying private mortgage insurance (PMI). If your home value has increased significantly, refinancing to remove PMI could reduce your monthly payment.

6. You Have an Adjustable-Rate Mortgage (ARM)

If you currently have an ARM and your fixed period is ending, refinancing into a fixed-rate mortgage can protect you from rising rates and give you a predictable monthly payment.

7. Life Changes Have Shifted Your Financial Needs

Major life events—new job, growing family, or retirement—can change your monthly budget. Refinancing may allow you to adjust your payment to better fit your long-term plans.

When NOT to Refinance

Refinancing might not be a good fit if:

• You plan to move soon (you may not recover the closing costs)
  
  
• Rates haven’t improved enough to justify the switch
  
  
• Your credit score has dropped
  
  
• You’re nearing the end of your current loan term
  
  

Final Thoughts

Refinancing isn’t one-size-fits-all—it depends on rates, your equity, your goals, and your long-term financial strategy. If you’re unsure, running the numbers with a trusted real estate or mortgage professional can help you determine whether refinancing will benefit you today and in the future.