When Does It Make Sense to Refinance Your Mortgage?
Refinancing comes with closing costs (typically 2–5% of the loan amount). On a $200,000 mortgage, that’s about $4,000–$10,000. The key question is: will the long-term savings outweigh those upfront costs?
When Refinancing Might Be the Right Move
- Interest Rates Have Dropped: If current mortgage rates are at least half a point lower than what you’re paying, refinancing could make sense.
- Example: Dropping from 7% to 6% on a $300,000 30-year loan could cut your payment by about $200 per month. If it costs $5,000 to refinance, you’d break even in just over two years.
- Your Credit Score Has Improved: If your credit score has climbed (say from 680 to above 740), you may now qualify for better rates even if overall market rates haven’t changed much.
- You Want to Shorten Your Loan Term: Switching from a 30-year to a 15-year loan helps you pay off your home faster and build equity sooner. You’ll likely pay more each month but save thousands in total interest over time.
- Example: On a $250,000 loan at 6%, shortening the term could raise your monthly payment by about $400, but save you over $100,000 in interest.
- You Want to Use Your Home’s Equity Wisely: A cash-out refinance lets you borrow against your home’s value to pay for home improvements, consolidate higher-rate debt, or cover big expenses. Just make sure you’re using that equity strategically, not stretching out the debt you’re trying to eliminate.
- You Want to Change Loan Types
- Moving from an adjustable-rate mortgage (ARM) to a fixed rate can protect you from future increases.
- Refinancing an FHA or VA loan to a conventional mortgage could eliminate mortgage insurance once you have 20% equity.
- You’re Updating Who’s on the Loan: Major life changes (like marriage, divorce, or removing a co-borrower) often require refinancing to update the legal responsibility for your mortgage.
How to Find Your Break-Even Point
This is the number that tells you how long it will take to recoup your refinance costs.
Formula:
Break-even months = Closing costs ÷ Monthly savings
Example: $6,000 in costs ÷ $250 monthly savings = 24 months.
If you’ll stay in your home longer than that, refinancing could be a win.
If you plan to move within a few years, the math may not work in your favor.
When Refinancing Might Not Be Worth It
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You’re planning to move soon
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Rates haven’t dropped enough
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You’re resetting your loan term too far out
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Fees eat up your potential savings
Let’s Look at Your Numbers Together
With mortgage rates in the 6–7% range in 2025, refinancing might make sense if your current rate is higher or if you’re looking for more stability.
And right now, WyHy’s Limited-Time Mortgage Offer makes it an even better time to explore your options. Qualified borrowers can lock in rates as low as 5.625% APR, giving you a chance to lower your monthly payments or shorten your loan term while saving big over the life of your mortgage.
WyHy’s mortgage team can walk you through your options, help you run the numbers, and find the best fit for your financial goals—whether that’s refinancing, buying, or tapping into your home’s equity.
Ready to see what you could save?
Check out our Limited-Time Offer Visit Our Home Loan Center