To Refinance Or Not, That Is The Question

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Deciding to refinance your home is a big deal. You are essentially replacing the mortgage loan you already have with a completely different one, basically like you are buying a house all over again. Most people jump at the chance to do this when rates are low, but that isn’t always a good idea.

There are actually a few different reasons why someone might want to refinance, so it’s important to do your due diligence before making the decision. Here are some things that will hopefully help you decide whether or not refinancing is the right choice for you.

A Few Things To Look At Before You Decide


Refinancing is going to cost you some money, so if you aren’t currently financially stable you probably don’t want to waste your time figuring out how to refinance. You should be steadily employed and confident that within the next five years or so you’ll still be in a stable job with stable income.

Ask yourself some very important questions before you head out to speak to your lender.

  • Will refinancing help you save money? If you won’t at least break even on the deal it may be a waste of time.
  • Figure out if you will actually qualify for the rate that you want. If your credit hasn’t been looking so good you might get the short end of the deal.
  • How long do you plan to stay in your home? If you extend your payment length but want to move out in a couple years you may be tying yourself down.

So, When Should You Refinance?


When rates are low, if you are in the position to refinance without worrying about your future ability to make your loan payments, refinancing can make sense because it will save you some money in the long run.

If you are in the military you may find refinancing to be a good way to save money as well, by looking into a streamlined VA loan. According to, you may even be able to get cash back on your refinanced loan, which can be used to make upgrades to your home.

And When Shouldn’t You?


If your idea is to simply refinance to consolidate some of your other loans into one you may be asking for trouble. Auto loan interest rates tend to be hire that home loans, so you may end up paying more in the long run, which defeats the purpose of refinancing.

You also want to make sure that you look at your closing costs compared to your income. If you can’t reasonably afford them upfront, then refinancing isn’t a good idea. Even if they roll over into your loan it will raise your interest rates.

If you look into all of this and you are still unsure of whether refinancing your mortgage is the right thing for you or not, talk to your loan officer to get some tips and ideas. They can let you know exactly what kind of interest rates you can expect and more.


Photo courtesy of: jarmoluk

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Kayla is a mid-20s single girl living in the Midwest, USA. She is focused on paying off her consumer and student loans, while simplifying her life and closet. You can join her on her journey at or follow her on Twitter @shoeaholicnomor.

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