When Should You Refinance Your Mortgage?
By Colson · Reviewed by Abodemic Editorial Standards · Updated June 1, 2026
Refinancing makes sense when the new rate is meaningfully lower and you'll stay past the breakeven point — when monthly savings recoup closing costs. Watch lifetime interest too: a new 30-year term can lower the payment while increasing total interest. This guide covers the full decision.
When is refinancing worth it?
Refinancing usually makes sense when the new rate is meaningfully lower than your current one and you'll keep the home past the breakeven point — the month when your accumulated monthly savings exceed the closing costs of the new loan. The refinance calculator shows that breakeven directly.
How to calculate your breakeven
Divide your closing costs by your monthly savings. If refinancing costs $6,000 and lowers your payment by $250 a month, you break even in 24 months. Stay in the home longer than that and you come out ahead; sell or move sooner and the refinance loses money.
Why a lower payment can still cost more
Resetting to a fresh 30-year term lowers the monthly payment but restarts the amortization clock, often increasing total lifetime interest. Always check the lifetime-interest figure, not just the monthly number — and consider refinancing into a shorter term if you can handle the payment.
Other reasons people refinance
- To drop PMI once they've built 20% equity.
- To switch from an adjustable-rate to a fixed-rate loan for stability.
- To shorten the term (e.g. 30-year to 15-year) and pay far less interest.