When to Refinance Your Mortgage

Refinancing trades closing costs for a lower monthly payment.

The Core Calculation

`` Closing costs ÷ Monthly savings = Break-even months ``

If refinancing costs $4,000 and saves $200/month, break-even is 20 months.

Real-World Inputs

• Closing costs: typically 2-5% of loan balance
• Origination fees, appraisal, title insurance, recording fees
• Discount points

When Refinancing Wins

• Rates dropped 0.5-1%+ since origination
• Loan balance is large
• You'll own the home another 3+ years past break-even
• Removing PMI by reaching 20% equity
• Switching from ARM to fixed before reset

When Refinancing Loses

• Costs exceed savings within your stay window
• You are months from selling
• Resetting a 25-year loan back to 30 years

Cash-Out Refinance

Borrow more than the existing balance. Risky when used for cars, vacations, or speculation.

No-Closing-Cost Refinance

Lender pays closing costs in exchange for a higher rate (+0.25-0.5%). Worse over the long term.

Educational only. Not financial advice.