Should You Refinance Your Mortgage? The Complete 2026 Guide
With rates fluctuating, knowing when refinancing makes financial sense could save you tens of thousands.
Refinancing replaces your existing mortgage with a new one, ideally at a lower interest rate. The potential savings are significant — dropping from 7% to 6% on a $300,000 mortgage saves $200/month and $72,000 over the loan life. But closing costs of $3,000-6,000 mean the math has to work for your timeline.
The Break-Even Rule
Divide closing costs by monthly savings to find your break-even point. $4,500 closing costs / $200 monthly savings = 22.5 months. If you plan to stay in the home longer than 23 months, refinancing pays off. If you might move sooner, it does not.
When Refinancing Makes Sense
Rate is at least 0.75-1% lower than your current rate. You plan to stay 3+ years. Your credit score has improved since your original mortgage. You want to switch from adjustable to fixed rate. You want to remove PMI (if you now have 20%+ equity).