When Should You Refinance Your Mortgage?
Refinancing can lower your monthly mortgage payment, shorten your loan term, or turn home equity into cash. It is usually worth considering when current rates are at least 0.5% to 1% below your existing mortgage rate.
How to calculate your refinance savings
Compare your existing monthly payment with the projected new payment, then subtract closing costs, appraisal fees, and lender charges. A simple break-even calculation tells you how many months it will take to recover the refinance cost.
Common refinance goals
- Reduce monthly payments to improve cash flow
- Shorten the loan term to pay off the mortgage faster
- Switch from a variable-rate loan to fixed-rate stability
- Access home equity for renovations or debt consolidation
Important refinance considerations
Check whether your loan has prepayment penalties, evaluate how long you plan to stay in the house, and avoid refinancing for smaller savings that take too long to pay back.