There are a few scenarios where refinancing your mortgage could make sense:
It will allow you to get a lower interest rate. You might refinance if doing so will allow you to lower your interest rate, either because “interest rates have dropped since you first obtained your mortgage” or “your credit score has improved since taking out your current loan,” said Bankrate. Ideally, your new rate will be “one-half to three-quarters of a percentage point lower than your current rate” to offset costs associated with refinancing.
You want to change your loan term or structure. Refinancing can also make sense if you’d like to change your loan’s term or structure. For instance, maybe you want a longer repayment term to lower your monthly payments or maybe you want a shorter term to lower the amount you’ll pay in interest. Or, maybe you “have an adjustable-rate mortgage that’s about to convert to the variable-rate period,” in which case “you could refinance to a fixed-rate loan to guarantee predictable monthly payments,” said Bankrate.
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