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Reasons You May Need a New Mortgage

by Kevin McKinley - May 3rd, 2015

Posted Under: estate planning

Now that you’ve (hopefully) finished and filed your income tax returns, it’s time we turn to another step that may involve lots of paperwork, confusion, and potential stress: getting a new mortgage. However, all the work involved in getting that mortgage can provide a much bigger payoff than any tax refund you have ever received.

Here are five reasons you may want to consider getting a new mortgage, even if you’re not buying a new house.

1. Your interest rate is too high

According to a recent release from, 35% of homeowners don’t even know what the current interest rate is on their mortgages. If you’re in this category, don’t feel bad, but start by finding out what you’re paying.

Then compare it to what else is available. Nationwide, the average rate on a 30-year is around 3.66%, and a 15-year mortgage is hovering under 3%. Depending on your current rate and length of loan, you may be able to refinance and save several hundred dollars per month.

Or you could refinance to a shorter term, keep your new payment close to the current amount, and pay the debt much sooner than you currently expect to do.

2. Your financial situation is better

Perhaps the last time you applied for a mortgage your credit score was lower than it is now, your income was less, or your debt level was higher.

If any or all of those factors have since improved, you may be able to get approved now, and with better terms than before.

Even if none of these variables have turned upwards, you may also benefit from an increased appraisal amount on your home, as well as lenders that have become a little more friendly in the past few years.

3. Your financial situation may get worse

A looming loss of income can come from losing your job, retiring, or maybe deciding to become a stay-at-home parent or caregiver.

If any of these are the case, you’re better off applying for a new mortgage now while you have income on which the approval can be based.

Once you’re out of the workforce, you’re more likely to need the money, and (by definition) less likely to get the new loan.

4. You have a big expense coming up

Very few homeowners have all the cash needed to pay for prospective home remodeling, higher education, or potential uncovered healthcare costs.

Therefore, most people are forced to borrow to pay for these expenses, and again, in many cases it’s better to get a new mortgage now to pay those costs, rather than to try to borrow when the actual bills come due.

Of course, it may be better to get loans that are designated for a specific purpose (such as student or parent loans to pay college costs). But it’s unlikely that you’ll get a loan with a lower interst payment or longer repayment period than what a new mortgage offers.

5. Your savings are too small

Yes, it feels good to pay down your mortgage as quickly as possible, saving money on interest expense and the monthly payment. But some owners prioritize being debt free over other more important goals, such as saving for emergencies, retirement, or college.