Pros and cons of refinancing your home loan

Refinancing your home is a big task, but it can be extremely beneficial in several circumstances. As with everything in life, though, something that is beneficial can also cause some problems. You should refinance your home when you can, but you should do it when it is most beneficial for you. In that way the pros will outweigh the cons. Lets look at a few of each side of this coin and you can go from there.


The positive aspects of refinancing can be substantial if you do it at the right time. The right time is after you have made some payments, at least six months of them. This gives you an increase in your personal wealth, which also increases the amount of a loan that you can get.

  • It can lower your interest rates, which in turn lowers the monthly payment that you will have to pay. Refinancing gives you better interest rates, if it does not you need to either find a new lender or find out why and work on the areas that caused the rate to stay high.
  • If your loan to home value ratio is 80% or over you will have had to buy some mortgage insurance, which can cost you a couple of grand every year. Once you have reached a level below that percentage, you should refinance to remove that payment.
  • If you would rather pay your loan off faster than save money refinancing can accomplish it for you. If you can find a low enough rate you may find that you are paying the same amount, put for a shorter time. 
  • Equity is huge when it comes to home ownership. Equity increases every time that you make a payment so if you can refinance home loan rates you will immediately increase your equity, which in turn raises your personal wealth amounts. 


Whenever there are positive aspects, you will find some negative ones that go along with it. It is time to go over some of the cons of refinancing.

  • If you refinance your loan, you will increase the length of time that you will be paying on the house. Unless you opt for higher payments and less time. Overall, though, you will be paying on the loan longer.
  • If you are unaware you will need to know that refinancing will cost you some fees. Each lender will charge you some fees that will be added on to your loan. If you have not reached your break-even point you may end up paying more than if you had stuck with your original loan.
  • As explained earlier equity is an important aspect of home ownership. If you refinance it could decrease your equity, depending on the contract and how much it set you back. Before going forward with a refinance option, you need to see if it will set you back and decide if you are all right with the decrease in your personal wealth. 

There are pros and cons to everything, and refinancing is no exception. You need to weigh each one before you go through an online site, such as iSelect, to get a refinance option. It can be greatly beneficial if done right. You need to be at a stage in your financial life where you have the ability to make a change. If you are working just enough to get by, you may not want to make a change that could affect the amount that you must pay out. You need to analyze your specific situation and go from there. It is a decision that only you can make, so base it off your needs and your abilities.