Refinancing your mortgage can lower your payment, shorten your loan, or tap your equity — but it is not always the right move. This guide helps you decide when you should refinance your mortgage and how to find your break-even point.
The short answer: refinancing makes sense when the savings outweigh the closing costs within the time you plan to keep the loan. Calculate your break-even point, compare it to how long you will stay in the home, and consider your goals. See our refinance page, use the mortgage calculator, and set up rate alerts. Get a quote to see your numbers.
Common reasons homeowners refinance
- Lower the monthly payment
- Shorten the loan term (for example, 30 to 15 years)
- Switch from an adjustable to a fixed rate
- Tap home equity with a cash-out refinance
- Remove mortgage insurance
How to calculate your break-even point (illustrative example)
Your break-even point is how long it takes for your monthly savings to cover your refinance closing costs.
Illustrative example only:
- Current payment: $2,000/month
- New payment after refinance: $1,850/month
- Monthly savings: $150
- Closing costs: $4,500
- Break-even: $4,500 ÷ $150 = 30 months
If you plan to stay longer than 30 months, the refinance may pay off. If you expect to move sooner, it may not. Your actual numbers will differ.
Costs to factor in
Refinance closing costs can include:
- Lender fees
- Appraisal
- Title search and insurance
- Recording fees
- Prepaid items
Ask your lender for a Loan Estimate so you can see the full cost upfront.
When waiting may be smarter
- You plan to sell before the break-even point
- Your credit has dropped since your original loan
- You recently refinanced and would reset the clock again
- Rates have not moved enough to justify the cost
Set a rate alert so you do not miss your window
Rates change often. Setting up rate alerts lets you know when rates drop for a scenario like yours, so you can act at the right time.
When you are ready, get a free quote.
This article is for general information only and is not a commitment to lend. Refinance savings depend on your loan, credit, and market conditions. Examples are illustrative only.
