Pros and cons of refinancing a home loan


Consumers home loans

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Find out if refinancing your mortgage is the right move for you now.

Knowing if it’s the right time refinance your mortgage isn’t always easy. However, evaluating the pros and cons can help guide your decision. Here’s what to consider.

Pros of mortgage refinancing

Homeowners can benefit in several ways from a mortgage refinance. Here are the top gains:

  • When you refinance at a lower interest rate, your monthly payment goes down and so does overall interest paid over the life of the loan. Total savings can add up to tens of thousands of dollars.
  • Refinancing is an opportunity to shorten the term of your mortgage. For example, some borrowers switch from a 30-year mortgage to a 15-year loan.
  • Refinancing a home loan provides an opportunity to tap into the equity you’ve built up. A cash-out refinance gives you access to money you can use for any purpose.
  • In cases of divorce, refinancing the home allows one partner to buy out the other’s interest.

Cons of mortgage refinancing

The pros of refinancing are certainly enticing but there may be drawbacks depending on your situation:

  • Closing costs of 2% to 5% of the loan’s principal will be part of the package. While you can generally roll closing costs into the new loan, it’s still money you have to pay. (If you see a loan advertised as a “no-cost refinance”, there are typically other fees assessed that are inflated to cover closing costs.)
  • If you don’t stay in your home long enough, you won’t recoup your costs. Check out our Refinance Break-Even Point Calculator to help you determine if the time is right for you.
  • Your long-term plans could be affected because the clock is reset. Consider this scenario: If you’re 10 years in on a 30-year loan, your house would be paid off in 20 years. If you refinance with a new 30-year loan, your payoff date will be pushed out 10 years later than you originally planned.
  • If you’re unemployed, don’t have steady income or your credit score has diminished since your last home loan, you may not qualify for refinancing. However, borrowers who don’t qualify for refinancing might be able to get a loan modification from their lender. The only way to know is to ask.

Next steps for mortgage refinancing

Want to learn more? Check out these FAQs about refinancing.

Ready to refinance?

If you’re ready to refinance a mortgage, call one of our mortgage loan officers at 800-991-2221. We’ll walk you through every step of home refinancing.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.

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Consumers home loans

We’d love to help you with a mortgage or home equity line of credit.

Learn more

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