When Does Mortgage Refinancing Make Sense?

Refinancing replaces your existing loan with a new one, ideally at a lower rate or better terms. But it only saves money if you stay in the home long enough to recover closing costs.

The Break-Even Rule

Divide your closing costs by your monthly savings. If refinancing saves you $200/month and costs $4,000 in fees, your break-even is 20 months. Stay in the home longer than that to profit.

When to Refinance

• Rates dropped 0.5% or more below your current rate
• You want to switch from ARM to fixed-rate
• You need to tap home equity for major expenses
• Your credit score improved significantly since origination

When NOT to Refinance

Avoid refinancing if you plan to move soon, your break-even exceeds your expected stay, or the savings are offset by extending your loan term.