Refinancing replaces your current mortgage with a new one. Done at the right time, it can save real money. Done at the wrong time, the costs can outweigh the benefit.
Good reasons to refinance
- Rates have dropped enough to lower your payment
- You want to move from an adjustable rate to a fixed rate
- You want to shorten your term and pay off the home faster
- You want to remove mortgage insurance after building equity
- You need cash from your equity for a major goal
The break-even test
Refinancing has closing costs. Divide those costs by your monthly savings to find how many months it takes to break even. If you plan to stay past that point, it usually makes sense.
Watch the loan term
Restarting a fresh 30-year loan can lower your payment but stretch out your payoff. Sometimes a shorter term is the smarter refinance even if the payment does not drop much.
Not sure if the timing is right? Our refinance analysis takes about a minute and shows your potential savings.