Should You Refinance Your Mortgage? How to Decide If It’s the Right Move

If you’re sitting on a high-interest mortgage or want to tap into your home’s equity, refinancing might be a smart move. But it's not one-size-fits-all. Let’s break down the real math, scenarios, and steps to help you confidently decide.

You might have heard neighbors talk about scoring a lower rate. Or maybe you saw headlines about dropping mortgage rates. But what’s in it for you?

Here’s the deal: Refinancing is swapping your current mortgage for a new one, hopefully with better terms. Done right, it could save you tens of thousands. But done blindly? It could cost you more in the long run.

Let’s sort through the confusion together.

• Refinancing can lower your monthly payment, shorten loan terms, or access home equity.
• It’s not always worth it; you must weigh costs vs. savings.
• Interest rates, credit score, home equity, and life plans all impact the decision.
• Not all refinances require starting over at 30 years.
• A refi can help consolidate debt or fund home renovations.

If your current rate is more than 1% higher than what’s being offered today, it’s worth running the numbers.

Pro Tip: Even a 0.5% drop could make sense if you plan to stay in your home long enough to recoup the costs.

Stretching out your term can ease your monthly budget. But remember: lower payments might mean paying more in total interest.

A 15-year refinance often comes with a lower interest rate. Yes, the monthly payment goes up, but you build equity faster and pay far less in interest.

Want to renovate your kitchen or pay off credit cards? A cash-out refinance lets you borrow against your home’s value, but you’ll restart your mortgage clock. Think of it as a reset with benefits and risks.

If you started with an ARM (adjustable-rate mortgage), switching to a fixed-rate mortgage could protect you from future rate hikes.

• Focusing only on rate: Closing costs, term length, and fees matter too.
• Restarting a 30-year clock: You don’t have to. Ask about custom loan terms.
• Not shopping around: Rates and fees vary by lender.
• Ignoring your break-even point: Know when your savings outweigh the upfront costs.

Step 1: Check your current interest rate.

Step 2: Get quotes from 2-3 lenders.

Step 3: Compare:

• Monthly savings
• Total cost of loan (with fees)
• Break-even timeline

Step 4: Ask yourself:

• Will I stay in this home at least 3-5 years?
• Do I have at least 20% equity?
• Has my credit score improved since I got my current mortgage?

According to Freddie Mac, the average closing costs on a refi are about 2-5% of the loan amount. That’s why comparing break-even points is crucial.

LendingTree reports that borrowers who shop around can save over $1,500 in fees alone.

Refinancing can absolutely be a financial win, but only when the math checks out and it aligns with your life goals.

Want help running your numbers?

realpha offers a commission-free home buying experience, giving you access to verified lender quotes with total transparency.

Or, talk to a licensed advisor at Be My Neighbor (NMLS #1743790) for tailored mortgage guidance.

It can cause a temporary dip due to credit inquiries, but the long-term impact is minimal if you make payments on time.

Typically 30-45 days, depending on your lender and documentation.

Yes, but rates and terms may be less favorable. Some lenders offer specialized products.

Only if your break-even point is shorter than your expected time in the home.

Appraisal, title insurance, origination fees, and more. Always ask for a Loan Estimate.

• Not a commitment to lend. Rates and terms are subject to change without notice.
• Always consult a licensed mortgage professional for personalized advice.
• Be My Neighbor is a licensed mortgage broker (NMLS #1743790).
• Realpha is a technology platform; mortgage services are offered through partnered, licensed entities.
• All offers are subject to underwriting and credit approval.

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