The trap of refinancing into a fresh 30-year
If you're 5 years into a 30-year and refinance into a new 30-year, you've added 5 years of interest payments — even at a lower rate. To compare apples to apples, refi into a term that matches your remaining years (25, 20, or 15) so you're not silently extending the loan. The monthly payment is higher, but lifetime interest can drop by tens of thousands.
- • 30→15 refi typically cuts lifetime interest by 50–70% if you can swing the higher payment.
- • Custom term lengths (22, 25, 27 years) exist at most lenders — just ask.
- • Run the lifetime-interest comparison, not just the monthly-savings comparison.
When NOT to refinance even if rates dropped
If you're moving in <3 years, if you have <5 years left on the mortgage, if you'd lose a sub-3% legacy rate, or if your credit score has dropped since origination — the math usually doesn't work. Also avoid cash-out refis to pay off credit cards unless paired with strict spending changes; the underlying habit usually rebuilds the balance.
Closing costs — what's actually in there
Origination fee (0.5–1% of loan), appraisal ($500–800), title insurance ($1,000–3,000), recording ($100–250), credit report ($50), tax service ($75), flood cert ($20), prepaid interest, escrow deposits, and lender attorney fees. Always request a Loan Estimate (LE) from 2–3 lenders and compare line by line — the rate can be identical and total costs can vary $3–5k.
No-closing-cost refis are not free
Lenders cover closing costs by charging a higher rate (typically +0.25–0.5%). This works mathematically if you'll be in the home <5 years (the higher rate costs less than the upfront fees). For longer hold periods, paying the closing costs upfront and capturing the lower rate wins every time.
FAQ
What's a good break-even period?
Under 24 months is excellent. 24–48 months is solid if you're staying put. 48–72 months requires confidence you won't move or sell. Over 72 months rarely makes sense — too many life-event risks.
Does this calculator account for taxes?
No — mortgage interest deduction is captured at tax time and varies by your bracket and whether you itemize. Most borrowers don't itemize anymore post-TCJA ($14,600 single / $29,200 MFJ standard deduction). If you do itemize, multiply the interest delta by your marginal rate to estimate the after-tax benefit.
Should I pay discount points?
1 point = 1% of loan upfront for typically a 0.25% rate cut. Break-even on points is usually 4–6 years. Worth it if you're certain to stay >6 years; skip otherwise.
Can I refinance with a different lender?
Yes, and you usually should. Your current lender has no special pricing power. Get quotes from 3+ lenders (a credit union, a broker, and a national bank is a good mix) — same-day pricing can differ 0.25–0.5%.
How much credit-score drop is enough to kill a refi?
Pricing tiers typically step at 760, 740, 720, 700, 680. Dropping below a tier can add 0.125–0.5% to your rate, which often kills the math. Pull your score before applying.
What about cash-out refis?
Cash-out refis convert home equity to cash but increase your principal. Rates are typically 0.25–0.75% higher than rate-and-term refis. Worth it for home renovations or to consolidate high-interest debt — bad for vacations, cars, or speculative investments.
Does the new lender have to pay off PMI?
If your loan-to-value (LTV) is under 80% based on a current appraisal, the new loan won't require PMI even if your old one did. Refis are a common way to escape PMI early if your home appreciated.
How long does a refi take?
30–45 days typical. Streamlined / no-doc refis (FHA streamline, VA IRRRL) can close in 2 weeks. Cash-out refis with full appraisal cycle take 45–60 days.
Will my property taxes change?
Refinancing does not trigger reassessment in most states. California Prop 13 specifically protects against this. Check with your local assessor if in doubt.
What about HELOC vs cash-out refi?
HELOCs are variable-rate and let you draw as needed — better for unknown ongoing costs. Cash-out refi locks a fixed rate on a known lump sum — better for one-time projects. HELOCs typically have lower closing costs but higher rates.
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Last reviewed
June 2026. We re-check every figure on the platform on a rolling quarterly cycle.
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