3 reasons people don't refinance when they should

Mortgage and Lending with Cambria Mortgage NMLS 274132

Minneapolis, MN: Mortgage interest rates have been amazingly low the past 6 months, and according to a major data firm,  over 18 million people could benefit from a mortgage refinance, and cut an average of $304 a month off their current mortgage payment.

Seems like a no brainer, yet many people simply don't take advantage, despite knowing mortgage interest rates are low, and their mailbox being stuffed full with offers to refinance from lenders.

Here is a small list of major reasons people don't refinance, and why you should: low mortgage rates

I Don't Qualify

Sure, maybe your situation has changed since your last mortgage loan, and you think you may not qualify. But unless you've actually made application with a mortgage lender, how do you really know? Don't Assume!

Contrary to popular myth, it doesn't hurt anything to officially apply and find out.  You may just be surprised that you do qualify, and how much you can save.

Interest Rates Are Not Low Enough

I've heard for decades, the very bad advice that it doesn't make sense to refinance unless you can lower your existing mortgage rate by some magical percentage, like 2% or something. The reality is that you should refinance if it makes sense, and it can make sense for many people without being a big rate drop.  For example, maybe you have an FHA loan with "Life of Loan" mortgage insurance. Maybe the current interest rates are not much better than what you have now, but you might be able to drop mortgage insurance, savings potentially hundreds per month. 

The next bad advice is for you to hold out for something lower.  Really? If you are at 4% now, and being offered 2.75%, holding out for 2.625% makes no sense at all. I've had clients tell they think rates will go into the 1's, so they will refinance then.  I don't have a crystal ball, but I'm not holding out for 1's. If they do come, I can always again refinance then.

Closing Costs Are Too Much

Yes they are. No argument. But the reality is there are a lot of people involved in the transaction, and they all get paid along the way. It's a fact of getting a loan. Most people roll the closing costs into the new loan amount, making it a no out-of-pocket cost transaction, although you can pay some or all of the costs out-of-pocket if you wish.

I advise people to stop focusing on the costs, and focus on the benefits.

I just dealt with a client who's current loan was in the upper 3's, and has 27-years left.  I was able to move him into a 20-yr loan in the middle 2's, all while keeping his payment nearly identical. So no payment change, and chop off 7-years. Wow... Amazing.  He didn't want to do it because closing costs were too much.

His total potential interest savings were $92,000!!  I'll happily pay closing costs in exchange for savings like that.

Refinance Tips

Many people automatically assume that refinancing with your current lender is the best choice. The sad reality is that more often than not, it is the worst choice. If you want to get a refinance quote from them, that is fine, but reach out to your local mortgage broker. You will very likely be surprised how much better it is.

No closing costs, low closing costs, no loan origination, and no lender fee options are all achieved by the lender giving you a higher interest rate. Nothing is free, and YOU always pay somehow. Small closing cost reductions mean small rate increases, while large cost reductions mean large rate increases. None of these options are automatically good or bad. It is all about the math, and does the math make sense.  Interesting fact. Almost everyone who calls me asking about a no closing costs type refinance ends up going with a more standard option.


Experience the Cambria Mortgage difference by calling (651) 552-3681, or visiting JoeMetzler.com.

Cambria Mortgage, Joe Metzler


YES, the counter top people! Equal Housing Lender. NMLS 274132, 322798. Cambria Mortgage lends in the following states: MN, WI, SD, ND, IA, FL, TX, CO, This is not an offer to lend or to extend credit, nor is this a guaranty of loan approval or commitment to lend. The information here may not be up-to-date and may no longer be accurate. Products and interest rates are subject to change at any time due to changing market conditions. Actual rates available to you may vary based upon a number of factors. Consumers must independently verify the accuracy and currency of available mortgage programs. All loan approvals are subject to the borrower(s) satisfying all underwriting guidelines and loan approval conditions and providing an acceptable property, appraisal and title report. (C) 2020 Joe Metzler

Comments (2)

Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Joseph,  I do not know how much lower the interest rates will go this year.


Nov 06, 2020 11:57 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Nov 06, 2020 12:49 PM