Should I Refinance My Mortgage?

Start with the breakeven, not the rate

Lenders market rates; your wallet cares about breakeven. Divide total closing costs by monthly savings. A $5,000 cost and $250 in monthly savings breaks even in 20 months. If you will stay at least that long plus a safety margin, the refinance earns its keep.

Be honest about your timeline. The average homeowner moves or refinances again within 7 to 10 years, but your plan is what matters. If a job change or growing family might move you in three years, a 40-month breakeven is a losing bet no matter how good the rate looks.

Match the refinance to your goal

Lower payment: take the rate drop at the same or shorter term. Shorter payoff: refinance into a 15-year term, which usually carries a lower rate and builds equity dramatically faster, though the payment may rise. Cash needs: consider cash-out, but price it against a home equity loan.

Removing mortgage insurance is a quiet win: if your home appreciated past 20 percent equity, a refinance can drop PMI even without a big rate change. ARM borrowers nearing a rate reset often refinance into fixed loans for payment certainty, which is about risk reduction, not savings.

When refinancing is a mistake

You have owned the home for decades and restart a 30-year clock: the payment drops but lifetime interest can double. You plan to sell within the breakeven window. Your credit dipped and the offered rate barely beats your current one after costs.

Also watch the serial refinancer trap: refinancing every two years for a slightly lower payment while rolling costs into each new loan slowly grows the balance instead of shrinking it. Each refinance should leave you clearly better off on lifetime interest, not just this month's payment.