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Refinance My Home

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HIGHLIGHTS
  • Determine whether the lifetime cost of your new mortgage is lower before considering to refinance a home.
  • There are many considerations in a refinance, including rate, monthly payments, APR, and lender fees.
  • Research rates and compare banks and lenders if you want to get a refinance mortgage loan.

Top Answers to the Question: Should I Refinance My Home and Mortgage Loan?

There will come a time in your life when it is a good idea to refinance your home. However, before you refinance, you need to determine if the market is right for refinancing, and if you are refinancing for the right reasons. It is also important to locate a lender who will work as your partner to meet all of your home refinance needs and assist you when you cry, "Help me refinance my home!"

Refinancing a home is not a decision to be taken lightly. With ARMs gone bad and a record number of foreclosures, refinancing can be a way to get some relief. However, there are many other reasons to refinance. Learn why people choose to refinance their homes, when it may not be the best decision, and whether it may be right for you.

Four Reasons to Refinance Your Home

There are many situations where refinancing a mortgage is a good decision. It can save your house, save you money, or help you with other financial needs. Read on to learn the four reasons to refinance your home.

Quick tip  Contact one of Bills.com's pre-screened refinance partners for a free, no-hassle mortgage quote.

1. Saving Money When You Refinance Your Home

Refinancing can be an effective way to save money on your monthly mortgage payment. Refinancing can save you money by lowering the interest rate, lengthening the term of the mortgage , or helping you pay off high-interest rate debt at a lower cost.

2. Changing an ARM to a Fixed Rate Mortgage

A good reason to refinance can be when you have an adjustable rate mortgage (ARM) and you refinance to lock into a fixed-rate mortgage. This will protect you from an increase in future interest rates, which could make it harder for you to afford your mortgage. Many people are taking advantage of the low rates available to refinance their ARMs into a a fixed-rate loan in order to reduce the stress and worry that comes with the uncertainty of an adjustable rate loan. Moving into a fixed rate mortgage can help you avoid financial trouble before it starts.

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3. Getting Money Out of Your Home

Another reason to refinance is to get money out of your house, which is known as a cash-out refinance. This type of refi allows you to access the equity in your house to use that money for other purposes. Many people do this to pay off other high-interest debts they may have. It is also a very popular choice for finally doing those improvements around the house. Of course, any time you take equity out of your house, you want to make sure you assess any possible risk involved and confirm that you are not putting your house in jeopardy.

4. Avoid Foreclosure with a Refi

If you are on the brink of foreclosure and are desperate to save your home, refinancing may be the answer for you. Whenever you are having trouble paying your mortgage, it is always a good idea to approach your lender and discuss the issue with them. They may be open to helping you through a refi or a loan modification. This can help you lower your current interest rate, lock in a fixed rate, and/or change the length of the loan, lowering your monthly payment and making your mortgage more affordable and helping you avoid foreclosure. You can also talk with other lenders or mortgage brokers to see if they have programs available for you. The biggest obstacles are going to be whether you have enough equity in your home and if you have missed enough mortgage payments to disqualify you from the available programs. If you do not, you need to talk to your lender and review your options.

Two Reasons Not to Refinance a Home

A refinance is not an easy fix to complicated problems, nor is it an ATM for making unneeded purchases. As with anything relating to mortgages or your house, you need to be smart about a refi and know when it is not the right decision.

1. When a Refinance Does Not Save You Money

Lower rates do not necessarily mean that a refinance will save you money. You need to thoroughly assess the situation and evaluate how much you will save, if anything. It is important to remember that with any mortgage, including the one you are about to refinance, there are always fees involved, such as closing costs. These can add up to several thousand dollars, which can prevent the refinanced loan from saving you money. You also need to consider how long you plan to stay in that specific house. If you plan to move in the near term, a refi may not save you money. Talk to a mortgage professional or trusted financial planner if you are not sure where you stand.

2. Cashing Out for Frivolous Purchases

We all would love to go on a two-week Caribbean vacation or buy the luxury or sports car we have always dreamed of driving, but using a cash-out refi for such purchases is not a very smart choice. Once you get into the habit of using your mortgage as a way to pay for things you can not really afford, you run into the danger of going into debt you cannot handle or losing your home. Using equity for home improvement projects can increase the value of your house. Using equity for luxury purchases saps the value from your home.

There are four good reasons to refinance a mortgage, and there are valid reasons not refinance, too. Everyone’s situation is different, and it is important to analyze yours before making any big decisions about your home. If you use a refi wisely, you can benefit, but knowing when to say “no” can also be to your advantage.

Comments (194)


Michelle B.
Portland, ME  |  February 03, 2012
Hello, with mortgage rates so low I was wondering if my husband and I should take advantage of it. We currently have a 15yr mortgage with 12 years left on it. Our rate is 4.87% with $112,000 left to pay. House is valued around $280,000. Payment includes our taxes & insurance is around $1427.00. We plan on staying here for many years. Is it possible to get mortgage loan under 15yrs? and is it worth it? We don't want to extend our years on our mortgage. Thanks
Bills.com
February 03, 2012
Yes, you can get loans for a shorter term than 15 years. For instance, there are 10-year loans available. You can also look into loan programs that allow you to customize your loan term, such as Quicken's YOURgage. You could also get a 15-year loan and make a monthly payment large enough to pay it off in the 12 years you currently have left.

At today's rates, you should definitely look into refinancing.
Renee H.
Lawrence, KS  |  February 01, 2012
My husband and I are trying to refinance our home and are "shopping" for the best lender. We have two estimates at this time. One is considerably less. The other lender asked to see the competitors estimate in writing? Is this common and is it a good idea to share this information?
Bills.com
February 01, 2012
I see no reason to not share it. What if the low-cost lender gave you quote that, by accident, forgot a costly item? The more expensive lender might actually be cheaper, and it is better to learn of this mistake now than at closing. (I speak from experience on this matter!)
Nate K.
Ixonia, WI  |  January 31, 2012
I have a 210,000 FHA streamlined loan initially at 6% we refinanced 2 years ago to 5% for 30/yr, my loan officer called today saying that we could refinance again to 3.85%, saving near 150$/mo. I plan on staying here indefinitely. I don't like resetting my 30years like this having done it once, also I am concerned that some how this will mess up my credit with all of my activity of refinancing etc. My question then is refinancing to this lower rate a good idea given my situation being so early in a 30 year loan or should I be content with 5%. Thanks!
Bills.com
February 01, 2012
Harm to your credit score is no reason to avoid a refinance. Any impact caused by the hard pull will be negligible in the short term, and not noticeable in the long term.

I understand your concern about reseting and reseting your maturity date. That would be a financially significant concern if you were 10 or so years into a 30-year loan. I have two thoughts:
  1. Accept the offer to refinance, but instead of pocketing the $150 per month savings, apply it to the payment. I did not run an amortization table, but my guess is by doing so you will retire your loan in 25 years or so. On months when money is tight, pocket the $150 and pay off your surprise expense.
  2. Ask the loan officer about a 20-year loan. Your payment may be about the same as your existing loan.
Compare your offer to today's refinance rates.
Melissa N.
Yukon, OK  |  January 27, 2012
I have a question... I have a mortgage in my ex-husbands name. When we purchased the home, we got a better rate without my name on the loan. We are now divorced, and I got the home in the divorce. Can I refinance this loan in my own name? If so, how do I do this? Thanks.
Bills.com
January 29, 2012
In order to refinance the home in your own name you will have to qualify for a mortgage loan based on your financial situation, including your income, credit score, and debt to income ration. In addition, the current home to value ratio will be a factor in what type of loan you can get. If you are approved for a loan, then your lawyer can aid you in the details regarding transferring title. I recommend that you read the Bills.com article about refinancing a mortgage loan to receive detailed information about qualifying for a loan. You can then proceed to receive a mortgage quote.
Maria M.
January 25, 2012
Our current home value is now 260,000 and have a 1st mortgage of 230,000 (30 year fixed w/5.625%). We are now on our 7th year and currently paying 2120/month. Our lender offered 4.375%/30 year fixed, a payment of 1807/month or 4.625%/20 year fixed with payment of 2148/month. The closing cost is 1400. Should we go with 30 yr or 20 yr? One more thing though, we are planning to sell the house in six years. Any advice would be appreciated. Thanks!
Bills.com
January 25, 2012
First, please check the interest rates which you were quoted. In general 20 year interest rates are lower than 30 year interest rates. The closing costs of $1400 is reasonable and check that all the costs are included. The decision to go with 20 vs. 30 years, depends on your goals. If you wish to lessen your monthly payment, then you want to go with a 30 year loan. If you wish to save more money and pay off your loan earlier, then go with the 20 year loan, or even a 15 year loan, which would have a lower interest rate. I am not sure how you arrived at your monthly payments. Do they include other costs than the principal and interest? Do you currently have PMI? Will the lender require PMI on the new loan? These costs could influence the cost of your loan. In addition, shop for a loan. Contact one of Bills.com pre-screened refinance partners for a free, no-hassle mortgage quote.

Lastly, it may be worthwhile to consider a 7 year ARM, as the interest rates will be even lower.
Tesa H.
Manila, CA  |  January 23, 2012
my house is worth less than what I originally bought it for. In addition, I refinanced 3 years ago, and used up the equity and now I owe that money on top of the original debt. The mortgage payment is so high that I moved out and now have a renter. The whole thing is a head-ache, and I don't know what to do.
Bills.com
January 23, 2012
Your basic options are to:
  1. keep making the payments
  2. try to refinance using the HARP program, or
  3. attempt to modify the loan with the lender.
Maureen G.
January 20, 2012
I own half a house can I get a morgage on my half?
Bills.com
January 20, 2012
Yes, in theory. However, in practice, the mortgage business has been in turmoil the last four years or so, and you will probably need to work with a small, local bank to find such a loan.
Vicki S.
Little Rock, AR  |  January 18, 2012
Hello, I have a home loan with a balance of $33,000, int. rate of 5%. I plan to stay in the home until it's paid off and now my pmt is $564 with just over $400 going toward principal. I can get a rate of 3.5% if I refinance (I would like lower payments (on the remaining balance), but would like to pay the house off in the same time period)... Since I've been paying on the house 11 years, if I refinance, the amt. of pmt going toward principal would go back to nearly zero for some years as when I first financed. Is there any advantage to refinancing a home at this stage in the game where a person owes less than half of what it was purchased for? I don't want to lose ground and spend $'s on interest unnecessarily. Thank you!
Bills.com
January 21, 2012
If you refinance your loan for the same time that you have left, in your case 11 years, and at a lower interest rate, then your monthly payment will go down and your overall interest cost will decrease. Your principal payment portion will actually increase. This is all true if you keep the same time frame and do not refinance into a loan for a longer period.

However, given the amount of money you owe, you should check carefully the closing costs on the loan. Since there are fixed costs as well as variable costs, it may not be worthwhile to refinance.
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