Should I Refinance My Mortgage?

Refinancing can save you hundreds a month — or cost you money if you move too soon. The deciding factor is one simple number: your break-even point.

Refinancing means replacing your current mortgage with a new one, usually to get a lower interest rate, change your loan term, or tap into your equity. It can be a smart move, but it isn't free — so the question isn't just "can I get a lower rate?" but "will the savings outweigh the costs before I sell or move?"

The break-even point: the number that matters most

Every refinance has closing costs (typically 2% to 5% of the loan). The break-even point is how long it takes your monthly savings to repay those costs.

For example, if refinancing costs $6,000 and lowers your payment by $250 a month, your break-even is $6,000 ÷ $250 = 24 months. If you'll stay in the home longer than two years, the refinance pays off. If you plan to move sooner, it doesn't.

Good reasons to refinance

• Lower your rate: Even a 0.5%–1% drop can save a lot over time, as long as you clear break-even.
• Shorten your term: Moving from a 30-year to a 15-year loan saves enormous interest if you can handle the higher payment — see our 15 vs 30 year comparison.
• Drop mortgage insurance: If you now have 20% equity, refinancing a high-PMI or FHA loan into a conventional one can eliminate insurance — more in our PMI guide.
• Switch loan types: Moving from an adjustable-rate to a fixed-rate loan for payment stability.

When refinancing usually isn't worth it

• You plan to sell or move before reaching break-even.
• The rate improvement is too small to overcome the closing costs.
• You'd restart a fresh 30-year clock late in your current loan, paying more total interest even at a lower rate.
• Your credit has dropped, so you wouldn't qualify for a meaningfully better rate.

Watch the "reset the clock" trap

If you're 8 years into a 30-year loan and refinance into another 30-year loan, you've stretched your payoff to 38 years total. A lower rate helps, but the longer timeline can erase the benefit. To avoid this, refinance into a term that matches your remaining years (or shorter), and compare total interest — not just the monthly payment.

Costs to expect

Refinance closing costs commonly include an application fee, appraisal, title search and insurance, and lender origination fees. Some lenders offer "no-cost" refinances, but those usually roll the costs into a higher rate — so run the numbers either way.

The bottom line

Refinancing is worth it when the monthly savings repay the closing costs well before you plan to leave the home, and ideally without stretching your payoff far into the future. Calculate your break-even point first — if it lands comfortably within your time horizon, a refinance can be a genuinely smart financial move.