Why refinance your mortgage

Your Practice. Popular Courses. Part Of. Know the Basics. Effects on Financial Status. When to Refinance. How to Refinance. Refinancing vs. Other Options. Home Ownership Refinancing A Home. Table of Contents Expand. Refinancing to Lower Rate. Refinancing to Shorten Term. Refinancing to an ARM or Fixed. Refinancing to Tap Equity. The Bottom Line. Key Takeaways Getting a mortgage with a lower interest rate is one of the best reasons to refinance.

When interest rates drop, consider refinancing to shorten the term of your mortgage and pay significantly less in interest payments. Switching to a fixed-rate mortgage—or to an adjustable-rate one—can make sense depending on the rates and how long you plan to remain in your current home. Tapping equity or consolidating debt are other reasons to refinance—but beware, doing so can sometimes worsen debt problems.

Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.

Related Articles. Partner Links. Related Terms Cash-Out Refinance This mortgage-refinancing option—the new mortgage is for a larger amount than the existing loan—lets you convert home equity into cash. Use it with care. What Is a Mortgage? A mortgage is a loan typically used to buy a home or other piece of real estate for which that property then serves as collateral. How Does a Balloon Mortgage Work? Cash-Out Refi Vs. Monthly Principal and Interest on Year vs.

Original Vs. Was this article helpful? Share your feedback. Send feedback to the editorial team. Rate this Article. Thank You for your feedback! Something went wrong. Please try again later. Our Guides To Mortgages. More from. Mortgage Broker Vs. Loan Officer Vs. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances.

We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. Performance information may have changed since the time of publication. Past performance is not indicative of future results. Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available.

Amy Fontinelle Contributor. Mike Cetera Editor. The Forbes Advisor editorial team is independent and objective. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site.

This compensation comes from two main sources. First , we provide paid placements to advertisers to present their offers. This site does not include all companies or products available within the market. The compensation we receive from advertisers does not influence the recommendations or advice our editorial team provides in our articles or otherwise impact any of the editorial content on Forbes Advisor. While we work hard to provide accurate and up to date information that we think you will find relevant, Forbes Advisor does not and cannot guarantee that any information provided is complete and makes no representations or warranties in connection thereto, nor to the accuracy or applicability thereof.

Here is a list of our partners who offer products that we have affiliate links for. Federal Trade Commission. Refinancing A Home. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data.

We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Part Of. Know the Basics. Effects on Financial Status. When to Refinance. How to Refinance. Refinancing vs. Other Options. Home Ownership Refinancing A Home. Table of Contents Expand.

To Consolidate Debt. To Move to a Longer-Term Loan. To Save Money for a New Home. To Take Cash Out for Investing. To Reduce Your Monthly Payments. To Do a No-Cost Refi. How Often Can You Refinance? The Bottom Line. Key Takeaways Refinancing your mortgage can be either a good or bad idea, depending on your motivation and goals as well as the financial terms of the refi.

Many consumers who refinance to consolidate debt end up growing new credit card balances that may be hard to repay. Homeowners who refinance can wind up paying more over time because of fees and closing costs, a longer loan term, or a higher interest rate that is tied to a "no-cost" mortgage.

Article Sources. Investopedia requires writers to use primary sources to support their work.