Pros
- You might pay down your loan faster. You might be able to direct the refinance savings toward paying down your mortgage balance sooner. This could help your loan come up from underwater — albeit over time — even if home values don’t change.
- You might save on interest. If the refinance results in a lower interest rate, you’ll save money in the long run.
Cons
- You have to pay closing costs. A refinance comes with closing costs, including mortgage insurance for an FHA streamline and fees for VA and USDA streamlines. You might not be able to afford these expenses if you’re already having trouble making loan payments.
- You could lose money if you plan to move soon. If your mortgage is underwater because your home has declined in value, you might be planning to move in the near future. In so, refinancing might not be worth the cost. You can use Bankrate’s refinance breakeven calculator to estimate how long you’d need to stay in the property to start saving.