Is It Worth It to Refinance?

Refinancing your home loan will ideally replace your current loan with a more favorable one. While the reasons for refinancing may vary, there are a few key objectives that can help you decide whether it’s worth it. It may be in your best interest to refinance if you need to: (1) pay off debt; (2) change your monthly payment; or (3) switch to either a variable or fixed rate loan.

Pay Off Debt

Many Americans struggle with high-interest debt from credit cards. If the interest rate on a new mortgage is lower than the interest rate on such existing debt, you could save a lot of money by refinancing your mortgage with a home equity loan or cash-out refinance. Your mortgage payments could increase and the term of your loan will likely be extended, although the expensive credit card debt would be paid off entirely and rolled into the amount owed on your mortgage.

Change Your Monthly Payment

If you experience a financial setback and are looking to cut costs, refinancing your mortgage at a lower interest rate could lower your monthly mortgage payment amount. For example, if you owe $350,000 on a 30-year loan with a fixed interest rate of 5%, lowering the interest rate by 1% could lower your monthly payment from about $1,879 to $1,671, saving you roughly $2,500 per year. Alternatively, if your financial circumstances improve and you’re able to afford larger monthly payments, it may be to your advantage to refinance your mortgage and shorten the term. Using the previous example, if that same $350,000 loan is shortened to a 15-year term, the monthly payment would increase to $2,768. However, over the life of the loan you would save over $178,000.

Switch to a Fixed or Variable Rate

Many home loans are adjustable rate mortgages (ARMs), which usually start out as fixed-rate loans and then switch to variable-rate loans after a few years. The major risk with ARMs is that if interest rates increase, then so will your monthly payment, perhaps to an amount that is unaffordable. Refinancing to a fixed rate, while it may increase your monthly payment, will give you certainty on your payment amount without any fear of fluctuating rates. Conversely, if you’re looking to lower your monthly payment, it may be in your best interest to convert from a fixed-rate mortgage to an ARM.


  1. Ann Manns on September 13, 2017 at 9:19 pm

    I’ve been trying to find a mortgage company that would refinance my manufactured home and land.
    Im paying 11.88% interest which is crazy. I’m wanting to lower interest, continue to pay same mortgage punts so I can pay off mortgage earlier.

  2. Patricia Starr on September 13, 2017 at 9:28 pm

    I’m a first time home buyer,and I’m basically renting to own my property.I also realized that I will be paying way more than what the house is really worth,I’m worried and I really don’t no what to do..

  3. Ikia on September 20, 2017 at 10:36 pm

    I’m trying too refinance my home…

  4. Daniel Gardner on March 3, 2018 at 6:52 pm

    My house recently appraised for only 60,000 and I owe seventy-two thousand my interest rate is 6.25 I want to lower it but no one will help

    • Jessica S. on March 14, 2018 at 4:08 pm

      Hi Daniel,

      Have you checked to see if you qualify for HARP? Here are some of the eligibility requirements:

      1. You are current on your mortgage, with no 30-day+ late payments in the last six months and no more than one in the past 12 months
      2. Your home is your primary residence, a 1-unit second home or a 1- to 4-unit investment property.
      3. Your loan is owned by Freddie Mac or Fannie Mae. You can use the Loan Look-up Tools below if you are unsure.
      4. Your loan was originated on or before May 31, 2009. By using the loan look-up tools below, this date will be made available to you.
      5. Your current loan-to-value (LTV) ratio must be greater than 80%. Calculate your LTV ratio with this tool:

      6. Is your mortgage owned by Fannie Mae or Freddie Mac?
      Use their online tools to quickly find out, or call them toll-free:

      Fannie Mae
      Loan Look-up Tool:
      Call: 800-7FANNIE (8 am to 8 pm ET)

      Freddie Mac
      Loan Look-up Tool:
      Call: 800-FREDDIE (8 am to 8 pm ET)

      Be sure and check your address on both the Fannie Mae and Freddie Mac look-up tool. If your address does not appear in the look-up tool of either site, your loan is not owned by Fannie Mae or Freddie Mac and you are not eligible for the program.

      If you believe you qualify and you’ve applied before but were turned down, I would recommend trying again. HARP has been significantly enhanced since it launched in 2009. The program now requires less documentation and has simpler guidelines, all designed to approve more loans.

      For more information, visit their official site:

  5. James aucoin on May 24, 2018 at 5:25 pm

    Well looks like you can’t help me behind on mortgage because of pay decrease and bank won’t work with me tryed for a loan modification got turned down

  6. Dorothy on October 3, 2018 at 10:29 am

    James, I understand, as I am in the same boat! I lost my good STATE job and struggled to make payments, because of the way money came in, it made payments late. Nobody wants to help so far so I am on the verge of loosing my home of over 20yrs!!!!!

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