Time to Refinance? Calculator

Refinancing your home loan can be a beneficial move, but it also comes with certain drawbacks. Understanding the pros and cons is crucial before making any decisions. 

Pros of Refinancing Your Home

1. Lower Interest Rates - A reduced interest rate can lead to significant savings over the life of the loan and overall interest paid.
2. Reduced Monthly Payments - You can reduce your monthly mortgage payments by securing a lower interest rate or extending the loan term. 
3. Shorter Loan Term - Refinancing to a shorter loan term, such as switching from a 30-year mortgage to a 15-year mortgage, can help you pay off your loan faster and save on interest costs. Although monthly payments may be higher, the overall savings can be significant.
4. Access to Home Equity - Cash-out refinancing allows you to tap into your home’s equity. This can provide funds for home improvements, debt consolidation, or other expenses. This is especially advantageous if your home has appreciated in value.
5. Switching Loan Types - Refinancing can also help you change from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, providing stability and predictability in your monthly payments or vice versa, depending on your financial needs.

Cons of Refinancing Your Home

1. Closing Costs - Refinancing involves different fees, including appraisal and closing costs. These fees can offset the savings from a lower interest rate, particularly if you plan to sell your home in the near future.
2. Extended Loan Term - While extending your loan term can lower monthly payments, it means you will be paying the mortgage for a longer period, which could result in paying more interest over the life of the loan.
3. Impact on Credit Score - Refinancing involves a credit check and can temporarily lower your credit score. Additionally, opening a new loan account affects your credit history and can impact your credit rating.