When Does Refinancing Make Sense?
Refinancing typically makes sense when you can lower your rate by at least 0.5-0.75 percentage points and plan to stay in the home long enough to recover the closing costs through monthly savings — this is your breakeven point.
The Breakeven Calculation
Breakeven Point (months) = Closing Costs ÷ Monthly Savings. If closing costs are $6,000 and refinancing saves you $200/month, breakeven is 30 months — meaning you need to stay in the home at least 2.5 years for refinancing to pay off.
Frequently Asked Questions
Refinancing makes sense when you can lower your rate by 0.5-0.75%+, plan to stay past the breakeven point on closing costs, or want to switch from adjustable to fixed-rate for payment stability.
Refinancing closing costs typically run 2-5% of the loan amount, covering origination fees, appraisal, title insurance, and similar costs to your original mortgage closing.
Yes, if you refinance into a new 30-year term, you restart the amortization schedule. Consider a shorter term (15-20 years) if you've already paid down significant principal, to avoid extending your total payoff timeline.