The pros and cons of refinancing a mortgage

Refinancing has pros and cons, and the decision to do so was one we didn’t take lightly. One of the cons is that you typically have to repay closing costs. Anyone who has closed on a home knows that closing costs are typically thousands of dollars.

To justify paying closing costs again, our mortgage broker informed us that we would break even in four years. This meant the amount we paid in closing costs wrapped into our mortgage payment would be “paid off” in four years. Because we plan on living in our home for much longer than four years, we knew that we would benefit from a lower rate and increased monthly savings over the course of the mortgage.

On the flip side, one of the pros of refinancing is applying a lower interest rate to the duration of the mortgage. Since we are only 16 months into our 30-year mortgage, we will have a long time to take advantage of the lower rate. This lower rate, in turn, means a lower payment.