With interest rates at all-time lows in 2020 and starting to creep back up a bit in 2021, you may be wondering if it’s too late to refinance your home’s mortgage in order to save some money. That being said, even if you do qualify for a great rate thanks to a solid credit score and history of on-time payments, you may still be unsure about whether or not refinancing your home’s mortgage is a sound financial decision. Generally speaking, saving money is good no matter how you do it. However, there are always pros and cons to think about as you weigh any major financial decision, and refinancing a home is definitely a major financial decision.

In some situations, like a scenario when you want to do some renovations or work on your home, getting a new lender is likely a bit easier to think about as a homeowner. Refinancing your home and dropping your interest rate a point or two can translate to thousands of dollars saved over the lifetime of the loan. With these savings from a lower APR, you could look into putting some much-needed work on your home and research the benefits of vinyl siding. Even so, it’s still a good idea to think critically about whether or not you really want to refinance your loan at this time. Read on for a few pros and cons to consider as you think about whether it makes sense for you and your family to look into refinancing your mortgage or not.

Will a lower rate save you money as a borrower?

With interest rates as low as they’ve been in recent months, it’s clear that from an interest payment standpoint, refinancing your mortgage will absolutely save you money over the term of your loan. If you consider the fact that a $250,000 mortgage winds up costing $456,000 over the lifetime of a 30-year loan at a 4.5 percent interest rate, it quickly becomes obvious that lowering your interest rate to even 3.25% could save you a total of $64,000 over thirty years. That’s money that could be invested into a retirement fund or college fund and can be put to good use, so it’s definitely worth talking to a private lender about your mortgage if you can save money and get a more competitive interest rate with a different lender.

Will refinancing your mortgage cost you in the short-term?

As you weigh the pros and cons of refinancing, you may come up against a few short-term drawbacks that may make you pause and think. Some of the cons of refinancing as a homeowner have more to do with your overall personal finances, while others are just financial considerations to weigh in regards to the mortgage itself.

For example, when you refinance your mortgage your credit score will get a hard check and your credit will likely go down for a period of time due to the new loan. That being said, your score will rebound in time and will likely not be too negatively impacted by the decision to refinance.

Another short-term cost to think about when you’re considering a refinance is if you’ll have to pay new loan origination costs with the new loan provider. Paying the lender for these fees generally isn’t too extravagant. However, it is worth noting that you will need to pay some money in the immediate short-term if you’re going to be refinancing your mortgage. You may also have to pay PMI (private mortgage insurance) if you don’t have 20 percent equity in your home. For this reason, some people choose to wait until they’ve built up more home equity, since the percentage you pay in PMI may wind up negating the interest points you’re saving with a refinance in the first place.