Is It a Good Choice to Refinance Your Mortgage Loan in 2021

Mortgages help Americans buy homes they can call their own, but it does not mean that the payment of the monthly mortgage fee is easy, especially if you have a higher mortgage rate than usual. After paying for years, people often consider refinancing as a way to lower their monthly mortgage payments. If you are also interested in exploring this option, here are the things you need to know:

Understanding Refinancing

Refinancing a mortgage is the process of acquiring another loan to pay off your existing loan. In this process, you get to keep your current house and obtain a mortgage to pay it off but under new payment terms. 

This method is highly recommended for those who desire a lower interest rate, a change from an adjustable rate to a fixed rate, or speed up or lengthen your payment term. However, the certainty of the perks mentioned is dependent on many factors. 

The Process of Getting Refinancing

Getting a new loan does not mean an easier process. When you decide to refinance, you will undergo the same method of applying for a new house. You need to apply for a loan, and the lenders need to verify your income and other assets. 

Similar to how you applied for a loan before, you also need to submit the required documents. They will check if your credit score, debt-to-income ratio, and even employment history meet their criteria. Afterward, a home appraisal will take place, and then you will wait until the loan reaches the closing phase.

You can apply from the same loan provider you had or look for a new one. Either way, you generally need to have at least 20% of your home equity to qualify. 

How to Know If Refinancing Is Good for You

Refinancing is ideal for you if you secure a good enough refinancing rate. Ideally, you need to get a lower rate than what you currently have. Even 1% lower would be a good sign, but it would be best if you compute and see the breakdown yourself. 

You can ask a loan expert to examine the numbers to help you understand the comparison of your current and future possible payments. One of the crucial things you should check is your break-even point. That refers to the time your savings are equal to the costs you are paying off. In other words, it is when your accumulated savings exceed the costs of your new loan. 

Knowing when that can occur could help you see how long it might take before recovering the upfront costs you spent for the mortgage refinancing. 

Make sure also to consider comparing lenders to see which one you could benefit from the most. A lender that proposes a much lower interest rate is not always the best option. As mentioned, it depends on many factors, such as your debt-to-income ratio and current credit standing.


The best time to refinance is when you can afford it. Make a calculation of your possible expenses in a given period and check if it is ideal for you. Remember that you still need to pay off your mortgage whether you refinance or not. If you get an interest rate that is lower than your current, then you have a chance to get higher savings. 

If you want to see the lowest mortgage rates in your area, paloRATE will let you see live mortgage rates. We are a mortgage broker with confidence in our rates, and we can handle all your mortgage needs. We can make the process more streamlined to help you live the life you deserve. Contact us today.