Refinancing replaces your current mortgage with a new one — ideally at a lower rate or better terms. Whether it is worth it comes down to the numbers.
The break-even point
Refinancing has closing costs, often 2%–5% of the loan. Divide those costs by your monthly savings to find how many months it takes to break even. If you will keep the home past that point, refinancing can pay off.
Good reasons to refinance
Lowering your rate, shortening your term to cut total interest, switching from an ARM to a fixed rate, or removing PMI after building equity are all common motivations.
Watch the reset
Refinancing into a new 30-year loan lowers the payment but can increase total interest by restarting the clock. Compare the full cost, not just the monthly payment, before deciding.
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