Is It Time to Refinance Your Mortgage?

Have interest rates dropped since you first bought your house? Are you in a considerably better place financially and credit wise than you were when you first got your mortgage? Are you looking for a way to lower your monthly mortgage or loan payments? If any of the above are true, then it may be time to take a closer look at a refinance mortgage.

A refinance mortgage, or 'refi' as it is popularly referred to, is a loan taken out specifically to pay off an existing loan for the purpose of lowering your current monthly payments - or reducing the total amount of interest that you'll pay. Refi loans become more popular when interest rates drop significantly, though there may be good reasons for you to consider a refinance mortgage loan even if the general interest rates have remained the same or increased. How does refinancing your current mortgage lower monthly payments and when should you consider a refinance mortgage loan?

Suppose that you bought your house with a mortgage loan from a local lender. Because of your lack of credit history and your decision to put down a small down payment, you ended up with an interest rate that was slightly higher than average. Five years later, the standard interest rates have dropped by nearly a full percentage point - which puts them nearly 3 percentage points below the interest rate on your current mortgage. You've been with your current employer for seven years, lived in the same house for five and have built a solid history of on-time payments on your mortgage and credit cards. You're in the ideal situation to seek a refinance mortgage because:

  1. A higher credit score and longer credit history may result in better interest rate available on new loans.
  2. A drop of 3 percentage points on your mortgage is significant. Most experts recommend considering refinancing if the new interest rate is at least 1 full percentage point lower than your current interest rate. In fact, drops of as little as half a percentage point in the APR can significantly lower your monthly costs.
  3. Your original mortgage carries a higher interest rate than market rate because of financial circumstances that no longer exist.

One other reason you might take out a refinance loan is to shorten the term of your mortgage. If you originally took out a 30 year mortgage at 5.25% APR, refinancing the loan for 15 years, even at the same APR, will lower your overall cost considerably though your monthly payments will be higher. Still, if you're in significantly better financial circumstances than you were when you took out the original mortgage, the overall savings could make it worth your while to refinance.

There are several factors to consider when deciding whether or not to refinance your existing mortgage. Some mortgages carry an early repayment penalty, for instance. There are also fees and closing costs associated with the new loan to add into the mix. You'll need to consider all the costs of taking out a new loan against the possible savings of a lowered interest rate before you decide if it makes sense to refinance your mortgage.

Make lenders compete
to get a low rate

Answer few questions and compare rates from multiple lenders

Compare Rates

Assurance IQ, LLC (“Assurance IQ”), NMLS #1912050 ( is a lead generator. See our current state licenses below and online here. Assurance IQ is not acting in the capacity of a mortgage broker, loan originator, correspondent lender or lender. Information received will be shared with one or more third parties in connection with your residential mortgage loan inquiry. The lenders determine whether you will be approved and the rate you will be offered. There is no guarantee that you will be approved for credit or that you will qualify for the advertised rates, fees or terms shown. The lenders’ credit decisions may vary based upon your loan request, your particular financial situation and other criteria determined by the lenders. All rates, fees and terms are not guaranteed and may change.

State broker licenses: Arizona - Mortgage Broker License: #1010424 4949 Pioneer Ln, Lakeside, AZ 85929. California – Licensed by the DBO under the California Residential Mortgage Lending Act #60DBO-115120. Colorado – Assurance IQ, LLC, 206-413-6771, Regulated by the Division of Real Estate, Mortgage Company Registration #1912050. Florida - Mortgage Broker License #MBR3633, 920 5th Avenue, Suite 3600, Seattle, WA 98104. Ohio – RMLA Registration #RM.804628.000, Oregon – Assurance IQ, LLC, Mortgage Lending License #1912050. Pennsylvania - Mortgage Broker License #78592.

The operator of this website, Assurance IQ, LLC, is a wholly owned subsidiary of Prudential Financial, Inc.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.