Thinking About Refinancing Your Mortgage? Here’s How to Know If It’s the Right Move

You have probably heard the message before: Mortgage rates are low. You might be paying too much. Refinance now and save.

There is some truth to it. Interest rates today are far below what they were in previous decades. If you locked in your mortgage years ago at seven percent or more, there is a good chance you could secure a better deal now. That might mean lower monthly payments and real long-term savings.

But the key word is might. Refinancing is not a one-size-fits-all solution. There are costs involved, and the benefits depend on your circumstances. Here is how to tell if it is worth looking into.

You plan to stay put for a while

Refinancing costs money. You will need to pay closing fees again, which can include loan origination charges, appraisals, legal fees, and more. These costs can add up quickly.

Let us say refinancing would save you one hundred dollars a month, but the process costs three thousand dollars upfront. It would take two and a half years to break even. If you are planning to stay in the home beyond that, refinancing could be a smart move. If not, you might want to hold off.

Take time to run the numbers or speak with someone who can help you do the math with confidence.

You’ve built at least 20 percent equity

Equity makes a big difference. If you own less than 20 percent of your home, lenders will often require private mortgage insurance. This adds a monthly cost that can cancel out the savings from a lower interest rate.

If you have 20 percent equity or more, you can usually avoid this extra charge. You can estimate your home’s value using online tools, but for a more accurate picture, speak to a real estate agent or a registered valuer.

You have paid off your high-interest debt

Before you consider refinancing, look at your other debts. If you are carrying credit card balances or personal loans with high interest rates, it is usually smarter to focus on those first.

Mortgage interest is often tax deductible and much lower than credit card interest. If you have a few thousand dollars available, using it to reduce high-interest debt is likely to deliver more value than refinancing your mortgage.

You’ve got an adjustable-rate mortgage that’s about to reset

Adjustable-rate mortgages can offer great short-term savings, especially if you were not planning to stay in the home long term. But once the rate resets, your repayments can climb significantly. Many homeowners are surprised by how much more they end up paying once their fixed period ends.

If your adjustable-rate mortgage is due to reset soon and there is no penalty for refinancing, now may be the right time to switch to a fixed-rate loan. It can offer stability, predictability, and peace of mind.

Refinancing can be a smart decision, but only when it works for your situation

There is no universal answer to whether refinancing is right for you. The decision depends on your current loan, your financial goals, and your future plans.

Start by reviewing your interest rate and loan type. Calculate how long it would take to recover the costs. Consider how much equity you have and whether you plan to stay in the home. If the numbers add up, refinancing could put you in a stronger position.

At Luminate, we believe smart finance starts with clarity. If refinancing makes sense for you, we will help you move forward. If it does not, we will be clear about that too.

Ready to explore your options? Talk to us. We are here to help you make the right move with confidence.