Should You Refinance Your Mortgage if You Already Have a Low Rate?


Talk about a real Sophie’s choice: Interest rates have been so long for so low now that many homeowners are faced with the decision whether or not to refinance a low, low rate into a new mortage at an even lower rate.

Even before the pandemic, mortgage rates were at historic lows and the last year hasn’t done much to change that. In fact, the fact that borrowed money is so cheap right now is one of the reasons that home prices are rising so fast across the country.

By the numbers: As of January 2020, the rate on a 30-year mortgage was just 3.72%, and 15-year mortgages could be secured for barely 3.16%. 

Those are killer rates that no one in their right mind would overlook. Except for the fact that right now the rate on a 30-year mortgage is just 2.96% and a 15-year is 2.3%. Crazy times we live in, and it’s no surprise that many people are thinking about refinancing to lower their monthly payments, reduce their overall interest costs or pull money out for other purposes.

Why refinance?

  • Cash-out: Borrow more than what you currently owe on the loan and use your home’s equity to fund something else.
  • Better loan terms: Maybe you currently have a 30-year mortgage and want to switch to 15 years to save on overall costs.
  • Removing mortgage insurance: If your home has increased in value since you bought it you might be able to remove your monthly PMI by refinancing once you have at least 20% equity in the home.

But think about the other costs: Here’s the rub, though. The interest rate isn’t the only factor to consider when looking into a mortgage refinance. There are closing costs, the total loan term (if you consider refinacing for a full 30 years again) and other considerations that might cost you more down the road than expected. 

Does the difference between today’s ultra low interest rates and your current rates justify the work and potential expense of going through a refinance? You’ll want to be able to answer that with a definitive yes before moving forward, no matter how good the deal looks.


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