When to Refinance

Refinancing replaces your current loan with a new one. It only pays off when the interest savings exceed the closing costs — which are real, often 2-5% of the loan.

The break-even rule

Divide your closing costs by your monthly savings. If the answer is less than the time you plan to stay, refinance. Example: $6,000 in costs, saving $200 a month, means a 30-month break-even. Stay longer and you win.

When to refinance

• Rates have dropped at least 0.75% to 1% below your current rate.
• You can drop PMI by refinancing into more equity.
• You need to switch from an ARM to a fixed rate before it adjusts.

When to wait

• You plan to move within the break-even window.
• Your credit score has dropped since the first loan.
• You have already paid a big chunk of the loan — restarting resets the interest front-loading.

Do not forget

A refinance resets your amortization clock. Compare your remaining total interest against the new loan on our calculator before committing.