The old "1% rule" — refinance when rates drop a point below yours — is a decent start, but the real math is about your break-even point.
The break-even calculation
Divide total closing costs (typically 2–5% of the loan) by your monthly savings. If costs are $6,000 and you save $200 a month, you break even in 30 months. Staying longer than that? The refi pays. Moving sooner? Skip it.
Reasons beyond the rate
- Dropping mortgage insurance once you reach 20% equity
- Switching from an adjustable to a fixed rate before a reset
- Shortening the term to cut lifetime interest
- Cash-out for high-interest debt consolidation — carefully
Watch the fine print
"No-cost" refinances roll fees into the rate or balance. Compare loan estimates from at least three lenders — they're standardized documents designed for side-by-side reading.
Search home refinance options to see what lenders are offering this month.
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