When Should You Refinance Your Home Loan

In fact, many mortgage-based commercials recommend refinancing to save money by taking advantage of historically low rates. The rule of thumb is that it’s best to refinance when interest rates are at least 1% lower than your current rate. But that’s not the only factor you should consider.

When Refinancing Your Home Loan Makes Sense Refinancing can lower your monthly mortgage payment by reducing your interest rate or increasing your loan term. Refinancing also can lower your long-run interest costs through a lower mortgage rate, shorter loan term or both. It also can help you get rid of mortgage insurance.

You might refinance from a 30-year to a 15-year mortgage. “Refinancing can also work if you have a HELOC (home equity line of credit) and want to consolidate the first and second [loans] into a new first mortgage,” she explained.

Homeowners are often encouraged to refinance their mortgages when interest rates are low. In fact, many mortgage-based commercials recommend refinancing to save money by taking advantage of historically low rates. The rule of thumb is that it’s best to refinance when interest rates are at least 1% lower than your current rate.