Reasons Why You Should Not Refinance

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Millions and millions of homeowners today have refinanced their mortgages, and some of them are even considering refinancing it a second time. However, although these rates are hitting rock bottom, refinancing is not the correct option for every homeowner. The following are the six reasons to opt out of refinancing your mortgage and consider other funding sources.LastPass – Family or Org Password Vault

A Very Small Loan Amount

With a minimal loan amount, it can become difficult to save enough money by refinancing to make this process worthwhile. For instance, refilling a $750,000 loan from 5.5% to 4% might yield a monthly savings of approximately $678. However, savings for a $75,000 loan will only amount to roughly $68 each month. Lenders also often lack the additional fee or interest rate premiums for a small loan amount. Thus, obtaining a rock-bottom mortgage rate that will serve you well becomes very difficult.

Small Rate Difference

Refinancing a large loan might result in noteworthy savings; however, getting a considerably better interest rate is also very important over the long term. While it is possible to save a lot of money by refinancing to a slightly lower interest rate, it is a painfully slow and steady process. Considering our low mortgage rates today, shoot for an interest rate of at least 1% lower than your current rate to make your time and effort worthwhile. 

Short Time Frame

While refinancing at today’s low rates can sometimes translate into substantial monthly savings on the mortgage bill, those savings do not usually come without noteworthy upfront costs. If you have only a few years before you are expected to move or refinance again, you may not want to reap the benefits of saving from a lower monthly rate. There are numerous ways to refinance and save some money alongside “no-cost” refinance plans, even if you have a concise time frame. However, these options often come with complex interest rates, reducing the various benefits considerably.

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Term Extension

If you have already refinanced and reduced the term of the loan you have taken, you might be forced to obtain a longer-term loan when you refinance. Characteristically, the shortest fixed-rate mortgage term is ten years. If you have less than ten years remaining on your loan, the one way you can ensure savings is to refinance the fixed-term loans and then make payments to reserve the remaining term.

A Low Rate ARM

Federal Reserve policies have recently driven down short-term interest rates to unparalleled lows. As some of these short-term rates administer the interest rates for adaptable rate mortgages, many borrowers have recently seen their interest costs fall as the new rates have sunk to the 2%-3% range. Refinancing to a fixed-rate loan today might help eliminate the interest rate risk associated with ARMs; nevertheless, this security comes at a very high cost and higher interest rates. Holding onto an ARM with a rock-bottom interest rate, for the time being, may not be such a depraved idea.

Inertia and Hassle

Getting a fresh mortgage in today’s tight lending climate is neither fun nor easy. It may be time-consuming if your current lender does not offer a streamlined refinancing program. If the monthly savings are too small or the reimbursements take too long to materialize, refinancing costs may outweigh the reimbursements.Download A Free Financial Toolkit

Refinancing your home mortgage may or may not suit you and your family. However, though there are many reasons to avoid it, there are also positive reasons to do it. Most importantly, you research and decide if refinancing your mortgage will benefit you.


In conclusion, while the allure of rock-bottom mortgage rates entices millions of homeowners, the decision to refinance is not universally beneficial. Homeowners should carefully evaluate their circumstances before diving into the refinancing pool again. Several key factors should guide this decision-making process.

Ultimately, whether to refinance a mortgage is a nuanced decision that demands careful consideration of individual circumstances. While there are compelling reasons to avoid refinancing, there are also instances where it can offer substantial benefits. A thorough understanding of personal financial goals and diligent research will empower homeowners to make informed decisions that align with their unique needs and circumstances.

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