Home Ownership: Should I Refinance?
Refinancing happens when you pay off your current mortgage with money from a new mortgage.
- Usually homeowners refinance to try to lower their monthly mortgage payment. For example, you might be able to get a new mortgage with a lower interest rate when interest rates fall.
- Refinancing may remind you of what you went through when you got your current mortgage. You go through the same process and pay many of same costs when you refinance.
It might not make sense to refinance your mortgage if:
Does your mortgage have a prepayment penalty?
- Check your monthly statement to see if your mortgage has a prepayment penalty. If so, you have to pay the penalty if you refinance your mortgage.
- Sometimes, you can avoid the penalty by refinancing with the lender you have now.
Are you planning to move soon?
- If you know you’re going to move in the next few years, you might not have time to recoup the cost of refinancing.
Has the value of your home fallen?
- If the market value of your home is lower now than when you took your original mortgage, you might not be able to get a big enough loan now.
- You might still be able to refinance through the federal government’s Home Affordable Refinance Program (HARP) or the FHA Short Refinance Program. Call the CFPB at 1-855-411-CFPB (2372) to speak to a representative who can connect you to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor, or find one at makinghomeaffordable.gov.
Do you have a home equity loan or line of credit?
- Your home equity lender may have to approve your refinance. If it refuses, you may have to pay off your equity line first, before you refinance.