Should You Refinance Your Mortgage?
The Break-Even Rule
Refinancing costs 2-5% of the loan amount in closing costs. Divide the closing cost by monthly savings to find your break-even point.
Example: Closing costs $6,000 ÷ monthly savings $200 = 30 months. If you plan to stay 30+ months, refinancing makes sense.
When to Refinance
Rates dropped 0.75-1% or more from your current rate. Your credit score improved significantly. You want to switch from variable to fixed rate. You want to remove PMI after reaching 20% equity.
Potential Savings
| Current Rate | New Rate | Monthly Savings ($300K) | 30-Year Savings |
|---|---|---|---|
| 7.5% | 6.5% | $210 | $75,600 |
| 7.0% | 5.5% | $303 | $109,080 |
| 8.0% | 6.0% | $418 | $150,480 |