Skip to main content

It’s not too late to refinance your mortgage — but move fast

Mortgage rates are on the rise, and it seems as though the historic lows we saw in 2020 appear to be no more. But it’s not too late to lock in a lower monthly payment for potentially the next decade if you move quickly.

Average mortgage rates have been lowering over the past few weeks, but according to Zillow economist Matthew Speakman told the Washington Post that’s unlikely to be the trend for long. If you’re considering refinancing, it’s time to move fast. We’re going to take you through all the basics of mortgage refinancing so you can make a well-informed decision on refinancing your mortgage before rates start to climb again.

landscaped house front

Get familiar with basic refinancing terminology

Since mortgage rates are still low but expected to increase soon, you will want to figure out whether you want to refinance your mortgage quickly. It’s a good idea to familiarize yourself with some of the common terms used in the world of refinancing so you can navigate your options quickly and confidently.

Recommended Videos

What does it mean to refinance your mortgage?

Refinancing means applying for a new loan and using that loan to pay off your current loan. You’ll need to qualify for the new loan and even pay closing costs for it. The benefit of refinancing is that you can take advantage of lower interest rates. You can get a lower interest rate if your financial situation has improved since the start of your original loan or if the market’s interest rates are trending downward.

Interest rate vs. APR

Your interest rate refers to the percentage your lender is charging on the money you borrowed. Your annual percentage rate refers to your overall annual cost as the borrower, including interest and fees like closing costs and mortgage insurance.

Fixed-rate vs. adjustable-rate mortgage (ARM)

Most lengthy mortgages have fixed interest rates which means that the rate’s percentage will not change throughout the life of the loan. However, an adjustable-rate mortgage (ARM) means that the interest rate will eventually fluctuate with the market. The benefit of an ARM is that if the market’s interest rates fall, so does your interest rate.

Closing costs

Closing costs refer to fees that are due at the time of closing. These often include costs for mortgage insurance, homeowners insurance, taxes, and appraisal costs.


When the amount of your loan is less than the value of your home, the difference is referred to as equity. You can sometimes take cash out against your equity and use it for home repairs, renovations, or even paying off other debt.

Private mortgage insurance (PMI)

Private mortgage insurance is required on any home loan that leaves less than 20% equity on the home. PMI protects the lender by reducing the risk of loaning you the money for your home. Once you pay down your loan enough that your equity is above 20%, you can drop your PMI.

Image used with permission by copyright holder

Is it the right time for you to refinance?

This may be a great time in general for refinancing, given the still-low average mortgage rates, but you’ll need to determine if this is the right time for your own financial situation. Even if the market rates are generally low, some elements will make it unwise to refinance right now.

Your current loan

If you still have many years left on your mortgage, a lower interest rate will benefit you in the long run. If, however, you only have a handful of years left, a refinance may not benefit you. Since refinancing means you’re taking out a new loan, your payments for the first several years will be higher since they will include your interest payments and fees.

The current value of your home

When refinancing, if your home has significantly increased in value, this will automatically impact your equity, give you a lower interest rate, and possibly allow you to avoid PMI on your refinanced loan. On the other hand, if your home’s value has diminished, this may cause your interest rate to go up.

How much debt and income you have

If you’ve recently taken out a new car loan, incurred a lot of credit card debt, or experienced a drop in annual income, now may not be a great time for you to refinance your mortgage. These are all considerations when qualifying you for your new loan and interest rate. High debt and reduced income result in a higher interest rate.

Your credit score

Not surprisingly, your credit score impacts what kind of interest rate you’ll get when refinancing. If your credit score has gone up significantly since you first took out your mortgage, now is probably a great time to refinance. On the other hand, if you’ve had some bad hits to your credit recently, it’s a good idea to hold off and work on increasing your score for a while.

Mortgage rates are expected to start climbing soon, and while it can be tempting, you shouldn’t jump into refinancing your mortgage without considering your current financial situation. Refinancing should be a tool that you use to save on your overall mortgage as well as your monthly payments, so be sure a refinance is beneficial for your pocketbook overall. If it’s not, keep watching market trends and prepare yourself for refinancing when the next downward trend emerges.

Veronica Sparks
Veronica Sparks is a writer from Milwaukee, Wisconsin who loves writing about gardening, home décor, and DIY life. She’s…
Gas dryers vs. electric dryers: Everything you need to know before you buy
Pros and cons of gas dryers and electric dryers
Small laundry room with washer and dryer and potted plants

If you own a home or condo, odds are you have a washer and dryer, but have you ever thought about the pros and cons of gas dryers vs. electric dryers? When you're in the market for a new dryer, you may feel forced to get the type of dryer your house is set up for. If you're building a house or have both hookups in your home, then you can choose which type you’d like.
Regardless of your current dryer situation, the differences between the two types are helpful to know. Which is cheaper to run? Which is easier to troubleshoot or work on yourself if repairs are necessary? Which one dries clothes faster? Here are the big differences between gas dryers vs. electric dryers so you can understand your system better or pick a new one that you prefer.

Similarities of gas dryers vs. electric dryers
Both electric and gas dryers have an inner coil that heats and uses a fan to move the heat around your wet clothes. All dryers have an internal drum that rotates and tumbles the clothes around. All dryers also require an electrical outlet because electricity runs the tumbler and fan regardless of the heat source. These are the similarities that all dryers share. Now, let's examine the major differences.

Read more
The secret Costco rotisserie chicken deal only pros and super fans know about
Love Costco rotisserie chicken? With this life hack, you'll love it even more
Costco rotisserie chicken

Chicken is a fan-favorite food, and for good reason — from barbecue chicken to chicken quesadillas to chicken parmigiana, it’s a lean protein that serves as the centerpiece for so many different meals. Consider this: In the early 1970s, per capita poultry consumption in the U.S. was almost 50 pounds; these days, it’s more than 100 pounds per person.

Of course, chicken hasn’t evaded the raging inflation that’s hiking up expenses every time we go to the grocery store (or gas station, shopping mall, or — well, just about anywhere.) According to the USDA, wholesale poultry prices are predicted to increase between 19-22% this year.

Read more
How to keep Costco croissants fresh for weeks (or months)
Don't throw out those stale croissants from Costco: 6 things to do instead
Costco croissants

The one thing we love about Costco is that we can buy the things we love in bulk. The one thing we wish Costco would change? It forces us to buy things in bulk. We know, it’s the ultimate catch-22 of first-world problems.

Croissants from Costco are some of the best you can buy, which itself is a weird statement. How is it that a warehouse store has baked goods that are better — and often fresher — than a lot of local bakeries? We love Costco croissants, but most households can’t get through 12 big croissants in a few days’ time. What can you do? 

Read more