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When mortgage rates are low, you may think, “Should I refinance my mortgage?” There are a few benefits when you refinance. You could lower your payment, shorten your term, lower your interest rate or lower your interest expense. But how do you know if refinancing is the right move for you?

Can I lower my interest rate?

If rates are lower than they were when you purchased your home, refinancing could be a great option for you. A lower interest rate could mean a lower payment, putting more money back in your budget. Even a 1% reduction in your rate could be enough of a reason for you to refinance.

Use this calculator to see if a refinance would be a good option for you.

Can I shorten the life of my loan?

Refinancing could be the answer if you want to pay off your mortgage faster. Depending on which term you choose, your payment may stay the same, while you’re paying off your mortgage faster. You could save quite a bit in interest by paying down your mortgage faster.

Will I lengthen the life of my loan?

While opting for a shorter term could help you pay off your mortgage faster, choosing a longer term could mean that a refinance isn’t the right choice for you. If you only have 15 years left on your mortgage and you refinance to a 30-year mortgage, refinancing won’t be beneficial to you. While your payment may be lower, you’ll just end up paying extra interest over the extra 15 years of the loan.

Can I convert to an adjustable-rate or fixed-rate mortgage?

If you originally opted for an adjustable-rate mortgage, locking into a fixed-rate mortgage may be beneficial when rates are low. An adjustable-rate mortgage offers a lower rate at first, but over time rates can increase. Switching to a fixed-rate mortgage can lower that interest rate and lock in a consistent payment each month.

How long do you plan to stay in your home?

When deciding to refinance, how long you are going to stay in your home is a factor you should keep in mind. Even if you lower your monthly payment, if you end up moving in a few months or years, that may not be enough time to offset the upfront fees and interest that come with refinancing.

How much will it cost?

In most cases, you’ll have to cover an appraisal fee, credit report, title insurance and closing fees. Your loan amount will increase once you roll in the fees and closing costs. Once you pay off that initial increase, you’ll see savings overall.

Now what?

If you’re thinking about refinancing or have more questions, visit our Online Mortgage Center or reach out to our Mortgage Department by calling 618-258-4575. We can walk you through the process and help you decide if refinancing is right for you.