📋 Table of Contents
Mortgage Refinancing Guide
Refinancing replaces your existing mortgage with a new one, potentially at a better rate or different term — worth considering when market rates drop or your financial situation changes.
Common Reasons to Refinance
| Goal | Refinancing Approach |
|---|---|
| Lower interest rate | Rate-and-term refinance |
| Access home equity | Cash-out refinance |
| Remove PMI | Refinance once reaching 20% equity |
| Change loan term | Switch between 15-year and 30-year |
Calculating If Refinancing Is Worth It
Compare closing costs (typically 2-5% of the loan amount) against your monthly savings to calculate your break-even point — refinancing generally makes sense if you'll stay in the home past that point.
Rate-and-Term vs. Cash-Out Refinancing
A rate-and-term refinance simply adjusts your rate or term without changing your loan balance significantly, while a cash-out refinance lets you borrow against built-up home equity — understand which goal applies to your situation.
Common Mistakes
Refinancing without calculating the break-even point, potentially paying more in closing costs than you'd save if you don't stay in the home long enough to recoup those costs.
Frequently Asked Questions
Generally when you can secure a meaningfully lower rate, and you plan to stay in the home long enough to recoup closing costs through monthly savings — calculate your specific break-even point.
Yes — once you've reached 20% equity, refinancing into a new conventional loan without PMI (or requesting PMI removal without refinancing, if eligible) can eliminate this ongoing cost.