When to Refinance a Mortgage

Introduction

When to refinance depends on your goals: lower rate, shorter term, cash out, or removing PMI. Calculate your Refinance Break Even Point to see how long it takes to recoup closing costs. See Refinance After Interest Rates Drop and What Is Refinance.

Frequently Asked Questions

When does refinancing make sense?

When you can lower your rate enough to recoup closing costs, want to shorten your term, need cash out, or want to remove PMI. Calculate your break-even point.

What is the refinance rule of thumb?

A common rule is to refinance when you can lower your rate by at least 0.75%–1%. The real test is whether you will stay long enough to break even on closing costs.

Should I refinance to a shorter term?

A shorter term (e.g., 30 to 15 years) can save interest but increases your monthly payment. Compare total cost and affordability.

When should I avoid refinancing?

Avoid if you plan to move soon (before break-even), if closing costs outweigh savings, or if it would extend your payoff date significantly without benefit.