Refinancing replaces your existing mortgage with a new home loan carrying updated rates and terms. Done correctly, it can slash your monthly payments and reduce the total interest you owe. Done incorrectly, it can lock you into high fees that wipe out your savings.
The Refinance Rule of Thumb
Generally, refinancing is recommended if you can reduce your interest rate by 0.75% to 1.00% or more. This rate reduction provides enough monthly savings to quickly recoup the upfront closing fees charged by the lender.
Quick Refinance Savings Estimator
$1,798
Calculating the Break-Even point
Lenders charge closing costs (appraisal, title checks, credit report services) that typically equal 2% to 3% of the loan value. To find your break-even point, divide the closing costs by your monthly savings. If setup fees total $6,000 and you save $200 per month, your break-even point is exactly 30 months. If you plan to move before 2.5 years, refinancing will result in a net financial loss.
🔗 Tools: Model your exact refinance savings and break-even timeline with our Refinance Savings Calculator or check current bank offers on our Compare Lenders Board.