When does it make sense to refinance my mortgage?

Refinancing makes financial sense when you can lower your rate by at least 0.5–1%, you plan to stay in the home long enough to reach the break-even point, and the closing costs are reasonable. The break-even is the number of months it takes for monthly savings to offset the refinancing costs.

What is a mortgage refinance break-even point?

The break-even point is when your cumulative monthly savings equal your closing costs. For example, if refinancing saves $150/month and costs $4,500 in closing costs, your break-even is 30 months. If you plan to stay beyond that, refinancing saves money overall.

How much does it cost to refinance a mortgage?

Refinancing typically costs 2–5% of the loan amount in closing costs, covering appraisal, origination fees, title insurance, and prepaid items. On a $350,000 loan, expect $7,000–$17,500 in costs. Some lenders offer no-closing-cost refinances in exchange for a slightly higher rate.

Should I refinance to a shorter term?

Refinancing to a 15-year term from a 30-year term raises your monthly payment but dramatically reduces total interest paid — often by 50% or more. It's a great option if you can comfortably afford the higher payment and want to build equity faster.

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25 ans Fixe 6.3% 15 ans Fixe 5.65% Taux Directeur BDC 6.75% Taux BDC 3.64%

Apr 16, 2026 · FRED / Federal Reserve

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When Does Refinancing Make Sense?

Refinancing replaces your current mortgage with a new loan — ideally at a lower rate. The core question: how long will it take your monthly savings to recoup the closing costs? This is your break-even point.

Strong case: Rate drops 0.75%+ and break-even is under 2 years
Consider carefully: Break-even is 3–5 years — only beneficial if you plan to stay
Avoid: Break-even exceeds 7 years or you plan to sell before then

What Are Refinance Closing Costs?

Refinancing isn't free. Closing costs typically run 2–4% of your loan balance. Common costs include:

Origination fee: 0.5–1% of loan amount
Appraisal: $400–$700 (confirms current home value)
Title search & insurance: $500–$1,500
Recording & government fees: $200–$500

Some lenders offer "no-closing-cost" refinances that roll these costs into your rate. This eliminates upfront payment but increases your long-term interest expense.

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