Start with the goal
Common refinance goals include lowering the payment, changing the loan term, removing eligible mortgage insurance, converting loan type, consolidating debt or accessing equity. Each goal requires a different comparison.
Calculate the break-even period
Divide eligible closing costs by expected monthly savings for a simple break-even estimate, then consider changes in principal repayment, loan term and total interest. A reset to a new longer term can reduce the payment while increasing lifetime cost.
Compare alternatives
A rate-and-term refinance, cash-out refinance, HELOC and home-equity loan affect existing debt differently. Homeowners with a favorable first-mortgage rate may benefit from comparing second-lien options before replacing the first loan.
Common questions
Frequently asked questions
How much lower should the rate be before refinancing?
There is no universal threshold. Loan balance, costs, payment change, remaining term and expected ownership period determine whether a refinance may be beneficial.
Does refinancing restart the loan term?
A refinance creates a new loan with its own term. Borrowers can compare different term lengths and evaluate payment and total-interest effects.
Can I refinance to remove mortgage insurance?
Depending on the current loan, equity, valuation and new program eligibility, refinancing may be one path to changing mortgage-insurance treatment. Other cancellation rules may also apply.