Here’s the five-step process to making a good decision when it comes to refinancing your mortgage:
- Know your current interest rate, your monthly payment, and your credit score.
- Determine if you’ll refinance your loan balance or would prefer a cash-out refinance.
- Will you refinance for a loan term that equals or is shorter than the time remaining on your existing mortgage? (Preferred.) Or will you extend your debt? (Not preferred, but a worthwhile option in certain circumstances.)
- Get an estimate of your closing costs from a mortgage refinance lender (or preferably two or more).
- Calculate the time needed to recoup those new loan costs. Use your monthly savings on a lower interest rate to determine this. That’s your break-even point. Is it equal or less than the time you plan on remaining in your current house? Good. Longer? Not good.
Now you have the answer to the question: Is it a good time to refinance your current mortgage? These are important insights. They are steps to take if you want to refinance your mortgage before the end of 2025.
