Should you refinance your mortgage? Compare your new payment, monthly savings, break-even month and total interest, with closing costs paid upfront or rolled into the loan.
Refinancing replaces your mortgage with a new loan, usually to get a lower rate or a different term.
Closing costs are often 2–6% of the loan. Adding them to the loan avoids cash upfront but increases the balance you pay interest on.
Divide the closing costs by the monthly saving. $6,000 of costs with a $200 lower payment breaks even after 30 months.
Often, if you'll stay in the home past the break-even point. Check the lifetime cost too: restarting a 30-year term can add interest even at a lower rate.