💸 When to Refinance Your Mortgage (and When Not To) 🏡

📉 Refinance Savings vs. Costs: What Homeowners Need to Know 💰

📉 Refinance Savings vs. Costs: What Homeowners Need to Know 💰

Refinancing your mortgage sounds like a smart move—lower rates, smaller payments, fresh terms. But here’s the real question: Does refinancing always save you money? The answer is… not always. In this guide, we’ll break down exactly when refinancing is a money-saving win—and when it’s not worth it.

✅ When Refinancing Does Save You Money

1. You’re Getting a Lower Interest Rate
This is the most common reason people refinance. If today’s rates are significantly lower than your original mortgage, it might reduce your monthly payment and total interest paid over the life of the loan.

2. You’re Shortening Your Term
Switching from a 30-year to a 15-year loan may increase your monthly payment, but you'll save tens of thousands in interest. Great move for homeowners with extra income or nearing retirement.

3. You’re Eliminating PMI
Refinancing to a loan without private mortgage insurance (PMI) can save hundreds per month if your home has appreciated or you’ve paid down enough equity.

4. You Want to Cash Out Smartly
Cash-out refinancing to consolidate high-interest debt (like credit cards) can be a smart financial play if managed responsibly.

❌ When Refinancing Doesn’t Make Sense

1. High Closing Costs
Refinancing usually comes with closing costs between 2%–5% of your loan amount. If you're not planning to stay in the home long enough to break even, it’s not worth it.

2. Resetting the Loan Clock
Restarting your 30-year term when you're already 10+ years in can result in more interest paid long term—even if the rate drops.

3. Prepayment Penalties
Some older mortgages include penalties for paying off your loan early. Always check your existing loan terms before refinancing.

4. Credit or Income Changes
If your credit score has dropped or your income situation has changed, you might not qualify for better terms than what you already have.

🎯 How to Decide

·         Use a refinance calculator to determine break-even time.

·         Consider your life plans—Will you stay in the home long enough?

·         Talk to a mortgage broker (like us!) for a custom refinance analysis.

💡 Pro Tip: Mortgage brokers can shop multiple lenders to find the best refinance deal—often with better terms than your current bank or servicer offers.

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© 2023-2024 Bill Rapp, Medallion Funds LLC, Director of Capital Advisory