Rates dropped, and everyone’s telling you to refinance. But before you jump in, let’s talk about whether it actually makes financial sense. The answer isn’t always yes.
The Breakeven Rule
The most important number in any refinance is the breakeven point — the month when your accumulated savings exceed the cost of refinancing. If your closing costs are $6,000 and you save $200/month, you break even in 30 months. If you plan to stay in the home longer than that, refinancing makes sense.
When It Clearly Makes Sense
- Rates have dropped 0.5–0.75%+ from your current rate
- You’re removing PMI by reaching 20% equity
- You want to switch from ARM to fixed before adjustment
- You need to shorten your term (30-year to 15-year)
- You need cash for home improvements or debt consolidation
When It Probably Doesn’t
If you’re planning to move in the next 2–3 years, the closing costs may not be recouped. If your rate is already low, the savings may be minimal. And if you’re extending a loan you’ve already paid down significantly, you may end up paying more in total interest over the new loan term.
Let Me Run the Numbers
I create personalized refinance analysis videos for my clients. Send me your current loan details — rate, balance, remaining term — and I’ll put together a video showing you exactly what a refinance would look like, including your breakeven timeline and total savings. No guesswork, no pressure.