6 Reasons Why You Should Refinance
Mortgage experts weigh in on refinancing options


Bridgette Torres, a senior loan officer with Fairway Independent Mortgage Corp. in Hockessin, Delaware, says she witnessed an uptick in customer calls regarding refinancing after the Federal Reserve cut interest rates in fall 2024 and mortgage rates fell slightly. Although they rose again slightly in September after the nation’s positive job report, “all signs point to lower rates in 2025,” she says.
Here are six reasons why you might consider refinancing.
1. To lower your mortgage interest rate
Consider refinancing if the rate drops by 2 percent or more, suggests Rob Grant, senior vice president at New American Funding, based in Tustin, California. Even a 1 percent reduction may be worthwhile, he adds, if you can justify the associated costs, which include lender fees, title insurance and legal fees.
Torres cautions that because of those costs it could take 36 months or more to see the benefit of refinancing.
2. To pay off credit card debt
Credit card interest rates are considerably higher than mortgage rates, Torres notes. Those with enough home equity can refinance for more than the remaining balance and use the excess to pay off credit card debt.
3. To pay for a home improvement
The “cash out” scenario can fund a new garage or addition. However, a home equity loan might be a better option for an improvement, says Tracy Chongling, vice president of mortgage lending with Guaranteed Rate in Newark, Delaware. That’s because there aren’t as many upfront costs. Also, a home equity loan will not restructure the current home loan, which some borrowers may prefer.
4. To reduce the loan’s life
Savvy borrowers who can afford to refinance from a 30-year loan to a 20-, 15- or 10-year option can potentially save thousands in extra interest, depending on the interest rate.
5. To switch to a fixed-year mortgage
Similarly, refinancing if you have a fluctuating adjustable-rate mortgage can save you a chunk of change.
6. To eliminate private mortgage insurance
If you put down less than 20 percent on your original loan, you’re likely paying for private mortgage insurance (PMI). If your home has appreciated in value, you might be able to eliminate or reduce your PMI by refinancing, Grant says.
However, refinancing for this reason might not be necessary if the property has significantly appreciated in value. Call your current loan service provider and ask them to evaluate the property to see if you can get the PMI waived, suggests Torres.
Other costs and figures to consider
Closing costs associated with refinancing can run between $4,000 and $6,000, Grant adds. You must meet all the lender’s requirements, including credit score checks and an appealing debt-to-income ratio.
Work with a mortgage representative to determine if the cost has a long-term benefit.