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  • Kate Herrmann

Some Do's and Don'ts of Refinancing Your Home

Owning a home isn’t for everyone, and it isn’t always the Shangri-la of adulting that society would like you to believe. Interest rates being low this year has been making home prices hotter than Dante’s fourth circle of hell. So holding off on buying might be right for you. If you already own a home, it might be a good time to refinance your mortgage and free up some money for other needs.


Refinancing your home basically replaces your current mortgage with a new one. You are buying your home from yourself. Why do people do this? Usually, it’s to take advantage of a lower interest rate, sometimes shorten the term of their mortgage, or get rid of their PMI (private mortgage insurance). At Money Positive, we embrace the 50/30/20 philosophy of needs, spending, and saving. With that, one really good reason to refinance is to lower your interest rate and restart the term of your mortgage to lower your monthly payment. This can help your bills stay below 50% of your income and give your budget some much needed flexibility.

A refinance is not the best way to pay for that dream trip to Palau or that mermaid certification course. Don’t risk your equity. The savings in your budget and money from cash outs are best spent reinvesting in your home to increase its value. This is another time to ask your realtor what would be a good reinvestment.

There’s no universal answer to whether it’s the right play, and the internet has no shortage of advice and explanations on the pros and cons of refinancing. DIYmortgage rate calculators can help you do the homework (but try to avoid entering your personal information into one of those rate generating sites; they will spam you). Check with your local banks and credit unions for the best rates. Don’t feel obligated to use your current financial institution. If you’re friendly with a realtor you trust, ask them for advice. They will want a relationship with you and will probably have some good advice from their experience.

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