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Refinancing allows you to modify the terms of your mortgage, with a lower interest rate. With the reduced interest rate, your payments will be lower, helping you to continue making your monthly mortgage payments. This is dependent, however, on your access to monthly income, such as monthly SSDI benefits, while you are not working. You also may be able to refinance for a longer term mortgage, which will reduce your monthly payments.

Tip: When refinancing, you typically have two months before you have to make your next payment. This can buy you some time, and allow you to obtain enough money so that you will be able to make the payment when it is due.


In order for a lender to provide you with a lower interest rate, it is extremely important that your credit stay in good standing. Remember, missing one mortgage payment can lower your credit score by 100 points and that makes it harder to qualify for a lower interest rate.

It is usually not a good idea to refinance at a higher interest rate, even if a lender recommends it, as you will be paying more than you were prior to refinancing.

Are there any negatives to refinancing?

You should only refinance if you can get a lower interest rate, or otherwise make your mortgage payment more manageable. Refinancing isn't cheap and you can have closing costs, such as:

  • Lender's fees
  • Appraisal costs
  • Application fees
  • Title fees
  • Prepayment penalties

The average cost of refinancing is 3 to 6 percent of your outstanding principal loan amount. These costs can add up and increase the cost of your home loan significantly.

What if you have a second mortgage?

If you have a first and second mortgage, you may be able to consolidate them into one payment with a lower interest rate when you refinance. This is dependent, however, on the amount of equity that you have in your home. You will not be able to consolidate your payments if:

  • You currently owe more on your home than it's worth.
  • The amount of your first and second mortgages combined is close to the value of your home.
Tip: Lenders will usually loan up to 90-95 percent of the home’s appraised value if you are refinancing and consolidating first and second mortgages.


 Does it matter if I have a fixed rate or an adjustable rate mortgage?

If you currently have an adjustable rate mortgage:

  • Refinancing and obtaining a fixed interest rate may be better because your monthly payments will not change and you will be able to budget for them.

If you currently have a fixed rate mortgage:

  • An adjustable rate mortgage may be better because you will have a lower interest rate for a certain period of time, and, therefore, lower payments. However, you will need to have the income and a plan to pay a higher monthly mortgage once the adjustable rate time period ends.