A mortgage refinance replaces your current home loan with a new one, often to get a lower rate or change the term. It can save money, but closing costs and a longer term can cancel the benefit.
Common reasons to refinance
- Lower your interest rate
- Shorten the loan term
- Switch from an adjustable to a fixed rate
- Access equity for major expenses
Calculate the break-even point
Divide total refinancing costs by your monthly savings. The result is the number of months to recover the cost. If you will move before then, refinancing may not pay off.
What lenders check
Expect a review of your credit score, income, debt-to-income ratio and home value. Better credit and more equity typically bring better rates.
Avoid pitfalls
Do not extend your term without considering total interest. Compare several lenders, and get all fees in writing before you commit.
Frequently asked questions
How much lower should the rate be?
There is no fixed rule, but the savings should comfortably exceed the costs over your expected time in the home.
Can I refinance with a lower salary?
It depends on your debt-to-income ratio, credit and equity.
Final thoughts
Use this mortgage refinance guide as a starting point, compare your options, and adjust for your own income and goals.
This article is for general information only and is not financial, tax, legal or insurance advice. Rates, rules and eligibility vary by country and provider, so check current details before deciding.
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