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It might, if one of these 6 situations applies to you.

Refinancing is a great way to shorten the term of your mortgage, lower your interest rate and payment amounts, and as a way to access cash out of your home equity for other needs. However, there are several things to consider before you decide if refinancing is right for you.

To figure out if you’ll save enough to make refinancing worth it, you need to factor in other aspects, like refi-related expenses.

So, could a refi be right for you? Possibly – if:

  1. You want a different type of mortgage: If you have an adjustable rate mortgage, where your monthly payments change along with the interest rate, a fixed rate mortgage will let you lock in a set payment amount for the duration of the loan – potentially providing some peace of mind if you’re worried about rate (and resulting mortgage payment) changes.
  2. You can combine loans and save: Refinancing may make sense if you can merge a primary mortgage and home equity loan into a single fixed-rate mortgage, spreading the payment out over the length of the loan.
  3. You’ll eliminate PMI: If you’re paying private mortgage insurance (PMI) because you couldn’t put 20 percent down when you bought your home, but the property has since increased in value, refinancing may help you get rid of PMI – and potentially save you money. If the new loan can account for less than 80 percent of your home’s value, borrowers generally won’t have to pay PMI.
  4. Refi-related expenses are reasonable: It’s not uncommon to have to pay 3 to 6 percent of your outstanding principal in refinancing fees, according to the Federal Reserve. These costs differ across the country, and the amount you’d need to pay could significantly affect how much you’d save by refinancing. So be sure to do your research and crunch the numbers to ensure a refi is worth it.
  5. Your financial situation may score you a better deal: Some of the best refinancing candidates have 10 to 20 percent equity in their home, a regular source of income and a good credit score, according to Consumer Reports magazine. If you’ve improved your score enough to qualify for a lower rate, the Federal Reserve says refinancing may make sense. On average, having a credit score of at least 720 will get you more attractive rates. You can check your credit score at TransUnion®, Equifax® and Experian®.
  6. You have a jumbo loan: In the past, the interest rate on jumbo loans usually has been higher than the rate on mortgages that fall within Fannie and Freddie limits, according to Bankrate. But that’s changed, and now there’s little difference. That can work to your advantage on mortgages that are more than $424,100 in most of the U.S., and $636,150 in high-cost markets like New York,  because of the savings on interest over time.

If it looks like refinancing would lower your monthly mortgage costs, ask lenders for a good-faith estimate, which may help you confirm all associated costs and figure out how much you’d save in the first year after you refinance.

Looking for more information about mortgages, refinancing or ways to make valuable home improvements? See our special offers available on our mortgages and home lending page.


Banking products and services are subject to bank and credit approval.  BMO Harris Bank N.A. Member FDIC. 

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