When to Refinance a Mortgage: Is Now a Good Time?

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There are many reasons you may want to refinance your mortgage. Such as getting a lower rate, shortening the amortization, changing between adjustable, variable or fixed rates, and more.

No matter your motivation to refinance your mortgage, you have to weigh the costs and benefits of doing so.

Let’s explore some of the reasons you may, or may not, want to refinance your mortgage.

Securing a Lower Interest Rate

One of the best reasons to refinance your existing mortgage is to lower the amount of interest you’re paying. This is what we do for a large portion of the clients we work with.

If you have a second mortgage on your home from an alternative or private lender, chances are you are paying anywhere from 6% to 15% in interest. That number can also be much higher.

These kinds of loans are typically short-term solutions. Refinancing your second mortgage into a new first when it comes up for renewal is usually better than paying the high-interest payments.

The same can be said about your first mortgage as well. The rule of thumb being that if you can save at least 1-2% on your interest rate, refinancing may be a good option.

Shortening the Amortization

When you have the opportunity to refinance your mortgage at a lower interest rate, you can reduce the amortization of the mortgage. Instead of 30 years, this could be shortened to 20 years, and your monthly payment would stay relatively the same.

This means you could pay off your mortgage years earlier without drastically changing your monthly cash flow. You will also save yourself from paying a considerable amount of interest at the same time.

Converting Between Adjustable-Rate and Fixed-Rate Mortgages

If interest rates are on the rise, converting to a Fixed-rate mortgage from an Adjustable or Variable rate mortgage can result in a lower interest rate overall and eliminates the concern and stress of future rate hikes.

On the other hand, if interest rates are falling, switching to an Adjustable or Variable rate mortgage can allow you to take advantage of the lower rates. Eliminating the need to refinance your Fixed-rate mortgage every time the term comes up.

To answer whether or not to switch between Variable and Fixed rates depends on where interest rates might go in the future. Working with a mortgage professional who can help you figure out the best move is a good idea.

Accessing Equity and Consolidating Debt

Refinancing your mortgage to access your equity and consolidate debt is a powerful yet dangerous tool.

Taking your high-interest debt and moving it to the low-interest rates of your mortgage could save you hundreds of dollars a month. This can also create an opportunity to go even deeper into debt if you’re not careful.

You have to be sure that you won’t just fall back into bad spending habits. Racking up more credit card debt after refinancing is all too common.

If you can resist that temptation, consolidating debt into your mortgage can put you on the path to financial freedom.

The trick is to use the tool properly.

Using your equity to fund a home renovation is another popular reason to refinance your mortgage. If that’s your plan, make sure you add value to your home and not just spend money on something cosmetic.


Refinancing can make a lot of financial sense if it reduces your mortgage payment, helps you pay off your mortgage sooner, or allows you to considerably reduce the overall amount of interest you’re paying on your debt.

When used correctly, refinancing can help you get your finances under control and put you into a much better situation.

Crunch the numbers and calculate the costs associated with the refinance and the benefits you’ll get from it. It’s good to have a knowledgeable mortgage professional help walk you through the process and fight on your behalf.

Click here to learn about why you should work with a mortgage broker.

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