Refinancing your mortgage is one way to save a lot of money. Lower interest rates, shorter terms, and different mortgage types can all be strategic cost-saving options that make refinancing appealing. But just like your original loan, refinancing comes with high costs—so it’s essential to do the math before jumping in.
Refinancing can cost between 3%–6% of the loan principal in closing costs. Some lenders also charge upfront application fees, appraisal fees, or title search costs.
There are many options and lenders to choose from when refinancing. Unless your current mortgage has a prepayment penalty, there is no waiting period between the original loan and a refinance.
But refinancing isn’t a one-size-fits-all solution. Your loan balance, interest rate, credit score, and more will determine if a refinance helps—or hurts—you financially.
Related Link: Reasons to Refinance Your Mortgage
Be mindful of refinancing costs and always evaluate your break-even point—the amount of time it takes to recoup your upfront costs through lower monthly payments. Use a break-even calculator to determine if the savings are worth it.
Interest rates fluctuate with the market. Even if your credit hasn’t changed, you might’ve locked in a higher rate when you first bought your home. Refinancing when rates drop—even by just 1–2%—can lead to big savings.
Your creditworthiness also impacts your refinance rate. If your credit score or debt-to-income ratio has improved, you may now qualify for a better deal.
Lower interest means lower payments, faster payoff, or both.
Check your rates today with Mares Mortgage. Refinancing may save you more money than you think.
Many homeowners start with a 30-year fixed loan, which spreads payments evenly but often results in higher overall interest.
Switching to a 15-year mortgage cuts the term in half and saves thousands in interest. And no, it doesn’t usually double your monthly payment.
You can also switch from a fixed-rate mortgage to a variable-rate mortgage, which fluctuates with the market. According to studies, variable-rate loans can sometimes save borrowers more over time.
Different mortgage programs offer unique benefits. First-time buyer programs and USDA loans allow for smaller down payments or rolled-in closing costs.
Related Link: Can You Buy a Home with No Money Down
However, some of these programs come with added fees and insurance, which may make refinancing into a more standard loan more cost-effective over time—especially if you want to pay your loan off faster.
Refinancing is also a tool for debt consolidation. If you have high-interest debt or need funding for a large expense (like tuition or remodeling), tapping into your home equity could be a smart move.
But proceed with caution. Refinancing debt means:
✔ Lower interest rates
✔ Potential tax-deductible interest
✔ Fewer monthly payments
However, you’re still replacing one debt with another, and closing costs (3–6%) still apply.
Related Link: Recast a Mortgage
If you’re prone to racking up new debt, refinancing may not be the best long-term solution.
If you've been in your home a while—or plan to stay for years—refinancing could help you save money, pay off your loan faster, or fund major expenses.
But it’s not for everyone. If you already have a historically low interest rate or can’t afford the upfront costs, refinancing may not make sense. And while it can help consolidate debt, not all debt should be rolled into a mortgage.
Major upgrades that add value to your home are a smart use of refinancing. Using it to clean up other debt? Only if you’ve got a plan and financial discipline.
Check your rates with Mares Mortgage today and see if refinancing is right for you.
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