{"id":7543,"date":"2025-06-27T13:04:53","date_gmt":"2025-06-27T20:04:53","guid":{"rendered":"http:\/\/canary.kcprod.info/blog\/?p=7543"},"modified":"2026-03-23T15:55:48","modified_gmt":"2026-03-23T22:55:48","slug":"value-mortgage-refinancing","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/value-mortgage-refinancing\/","title":{"rendered":"Mortgage Refinancing: What You Need To Know"},"content":{"rendered":"\n

If you\u2019re a homeowner, your mortgage payments are probably one of your biggest expenses each month. And as you know, those payments are in large part determined by your mortgage interest rate. Because of this, changing your interest rate by refinancing your mortgage can be very beneficial\u2014especially if your current rate is fairly high, which it might be if you purchased your home recently.<\/p>\n\n\n\n

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The decision to refinance might seem like a simple one\u2014refinance as soon as you learn you can get a lower interest rate. But it\u2019s a little more nuanced than that. In this post we\u2019ll provide a primer on mortgage refinancing so you can confidently determine whether it\u2019s the right fit for you.<\/p>\n\n\n\n

Refinancing lets you lock in a lower interest rate<\/strong><\/h2>\n\n\n\n

You\u2019re probably familiar with the main benefit of refinancing: Getting a lower interest rate on your mortgage. Over time, this can help you save a lot<\/em> of money on interest costs. Consider the simplified example below, which shows how much a lower interest rate can affect your monthly payment and total interest cost over 30 years.<\/p>\n\n\n\n

Original Mortgage<\/strong><\/td>Refinancing <\/strong><\/td><\/tr>
$500,000 principal remaining
7% interest rate, 30-year fixed rate<\/td>		$500,000 principal remaining 
6.5% interest rate, 30-year fixed rate<\/td><\/tr>
$3,326.51 monthly payment<\/td>$3,160.34 monthly payment <\/td><\/tr>
$697,543.60 total interest cost over the life of the loan<\/td>$637,722.40 total interest cost over the life of the loan<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

As you can see, lowering your interest rate by even half of a percentage point can make a significant difference in what you owe each month. In the example above, you\u2019d save about $60,000 in interest over the life of the loan just for refinancing. And in the same example, refinancing would shrink your monthly payments by over $150 per month. This could free up cash for a variety of other purposes\u2014you could invest more, pre-pay your loan, or just enjoy the extra wiggle room in your budget. <\/p>\n\n\n\n

You might have heard the rule of thumb that you should only refinance if you can get a rate that\u2019s 1% or even 2% lower than your current rate. That isn\u2019t necessarily right. This rule is somewhat old, and housing prices have increased significantly in recent years. Higher housing prices generally mean larger loans, and for larger loans, it takes a smaller change in interest rates to make refinancing worth it. Put another way, the bigger your loan is, the bigger the impact of a small interest rate change. <\/p>\n\n\n\n

Beyond the interest rate: Closing costs and other considerations<\/h2>\n\n\n\n

As we mentioned above, interest rates aren\u2019t the only consideration when you refinance. The situation is complicated by a few other factors, including the closing costs associated with taking out a new loan. These can include appraisal fees, title searches, deed-recording fees, and many others. These costs vary widely from lender to lender, and can be a source of confusion for many would-be refinancers. <\/p>\n\n\n\n

When you refinance, closing costs can be around 2% of the amount you\u2019re borrowing\u2014so for the $500,000 loan in the example above, that would be $10,000. There is significant variation in that number, however\u2014it could be higher or lower depending on a host of individual factors. One of the biggest factors that can drive closing costs up or down is how you handle property taxes and homeowner\u2019s insurance. If you choose to impound taxes and\/or insurance<\/a>, taking out a new loan (refinancing) will require a new impound account and your lender will collect that money at closing. <\/p>\n\n\n\n

You might get mail from financial institutions promising extremely low closing costs\u2014or in some cases, no closing costs at all. We think it\u2019s prudent to approach these offers carefully. Lenders with \u201clow\u201d closing costs often charge higher interest rates to make up the lost fees or add the closing costs to the mortgage balance, meaning these attractive-seeming loans can end up costing more in the long run. Rolling your closing costs into your new loan can make sense for some people, though\u2014especially if you plan to invest the money you save up front and the gap between mortgage rates and expected investment returns is fairly wide.<\/p>\n\n\n\n

Other factors that could influence your decision to refinance outside of interest rates are:<\/p>\n\n\n\n