Should I refinance my mortgage because of low interest rates
Financial Planning

Should I Refinance My Mortgage Because of Low Interest Rates?

Interest rates are at record lows and will most likely be at this level for a while. Should you take advantage of these low interest rates and refinance your mortgage?

I have heard this question numerous times from clients this year.  It’s fantastic that you are considering refinancing as this could be a huge cost-saver for you! But before you submit any refinance applications, here are a few things to think about when asking yourself should I refinance my mortgage because of low interest rates?

Things to keep in mind when asking should I refinance my mortgage because of low interest rates:

  • Remember that refinancing is not free. You will need to pay some times thousands of dollars in fees to do this. When speaking to lenders about refinancing, be sure to ask about an estimate for fees.  
  • It takes time paying for your new refinanced mortgage to make sense and pay off (literally) for you. The goal of the refinance is to save enough money in your payment due to the lower interest rate, to compensate for these up front fees. And ideally, then some! So, if you plan to sell your house in the near future, a refinance may not make sense.
  • What has changed since you took out the original mortgage. How’s your credit score? Your credit score will need to be pulled, and if your credit isn’t as good as it was when you took out your original mortgage, it may not make sense to refinance. What’s your home equity %? Your refinance may require a certain equity threshold. How’s your cash flow? How’s your cash flow – can you afford to cut your term down?
  • There will be decisions as to what new mortgage to choose. Refinancing, or even taking out your first mortgage, makes a gamble on where interest rates are headed. Should you consider a fixed interest mortgage, or adjustable-rate mortgage (ARM)? What term do you choose? Do you currently have PMI? All of these factors will ultimately determine your final payment and interest rate – and whether the refinance makes sense.
  • Also, know that your taxes may change with a smaller interest deduction. This could push you out of itemizing, and you may lose some deductions you normally may take.

I recommend speaking with a mortgage broker or at least 3 lenders to hear about what refinancing offers they currently have. 

Financial Calculators

In the meantime, a calculator is a great way to take a first step in deciding if a refinance could make sense for you. A calculator often shows where the crossover point is – so given your current mortgage and what you’re paying now, versus your new mortgage and estimated closing costs – at what point does the refinance start to save you $? 

Here are a few options for calculators:

https://www.bankrate.com/calculators/mortgages/mortgage-refinance-break-even-calculator.aspx

https://www.nerdwallet.com/mortgages/refinance-calculator

Any questions on whether this is a right choice for you, feel free to reach out at kponesse@ms-wealth.com.

For additional articles related to financial planning topics, check out this section of our site.


Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Marshall & Sterling Wealth Advisors, a Registered Investment Advisor. Marshall & Sterling Wealth Advisors and Marshall & Sterling Wealth Management are separate entities from LPL financial.

Opinions voiced in this article are for general information only and are not intended to provide specific advice or recommendations. To determine which investment may be appropriate for you, consult with your attorney, accountant, or financial advisor prior to investing. 

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment, tax, or legal advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Kelsey is a Wealth Planning Advisor and Certified Public Accountant at Marshall & Sterling Wealth Advisors, located in the New York tri-state area. Kelsey enjoys working with those who feel they find themselves juggling various financial goals and they aren’t sure where to put their money first. Whether it’s saving for their children’s education, maximizing corporate benefits large corporations, or wanting to know if they can afford that dream upstate house, she helps them pull the pieces together into a clear path to success. Kelsey has an MBA and B.S in Accounting from Alfred University. She also holds her Series 7 with LPL Financial, Series 66 with LPL Financial and Marshall & Sterling Wealth Advisors , and New York life insurance and annuity license. Prior to working in wealth management, she worked as an auditor in both the public and private accounting industries. In her free time she enjoys running and exercising, reading, and she is an enthusiastic supporter of local businesses, specifically in the Hudson Valley. She can be reached at reached at kponesse@ms-wealth.com or 845-554-1046 x2353. You can read more about Kelsey and Marshall & Sterling Wealth Advisors at www.ms-wealth.com.

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