When to refinance, how to compare your options, and what to expect during the process.
Refinancing replaces your current mortgage with a new one — ideally at a lower rate, shorter term, or with different loan terms. The decision comes down to one question: does the long-term savings outweigh the cost to refinance?
Strong reasons to refinance
The break-even point
Refinancing costs money upfront (closing costs typically run 2%–3% of the loan amount). Calculate your break-even point: divide your closing costs by your monthly savings. If you plan to stay in the home past that point, refinancing makes financial sense.
Example break-even calculation
Closing costs: $5,000 / Monthly savings: $200 = 25-month break-even. If you plan to stay in the home more than 25 months, the refinance pays off.
Tony AI
Tony will analyze your current loan and show you estimated refinance options — no commitment, no credit pull.
Start my personalized rate in 60 secondsNot all refinances are about getting the lowest rate. Some borrowers refinance to lower their monthly payment even if the rate doesn't drop dramatically — by extending the loan term. Others refinance to a shorter term to pay off faster and save on total interest, even if the monthly payment goes up.
Lower Payment Strategy
Refinance to a lower rate or longer term to reduce monthly cash flow obligations.
Pay-Off-Faster Strategy
Refinance to a shorter term (15yr or 20yr) to build equity faster and pay less total interest.
A cash-out refinance replaces your current mortgage with a larger loan. The difference between your new loan amount and your current balance is paid to you in cash at closing. This is a way to access your home equity without selling the home.
Cash-out refinances are commonly used for home improvements, debt consolidation, business funding, or major expenses. The key difference from a HELOC or HELOAN: you replace your entire first mortgage, not just add a second lien.
How it works — Example
Cash-out vs Home Equity
If your current rate is low, a cash-out refinance may cost you more in the long run by replacing a low rate with a higher one. In that case, a HELOC or HELOAN may be a better option — it accesses equity without touching your first mortgage. See our Home Equity guide.
Tony AI
Tony will analyze your current loan and show you estimated refinance options — no commitment, no credit pull.
Start my personalized rate in 60 secondsPMI (private mortgage insurance) is required on Conventional loans when your down payment is less than 20%. It typically costs 0.5%–1.5% of the loan amount per year. On a $400,000 loan, that's $2,000–$6,000 per year added to your payment.
If your home has appreciated and you now have 20% or more equity, refinancing into a new Conventional loan eliminates PMI entirely. This is one of the most financially impactful reasons to refinance — especially in markets where home values have risen significantly.
FHA MIP is different
FHA loans charge MIP (mortgage insurance premium) for the life of the loan if your down payment was less than 10%. The only way to remove FHA MIP is to refinance into a Conventional loan. Once you have 20% equity, this refinance typically saves $200–$400/month.
Refinancing also lets you switch between loan types — from FHA to Conventional, from ARM to fixed-rate, or from a 30-year to a 15-year term.
FHA → Conventional
Remove lifetime MIP once you have 20% equity. Saves $200–$400/month on most loans.
ARM → Fixed Rate
Lock in a stable rate before your adjustable rate resets. Eliminates payment uncertainty.
30yr → 15yr
Pay off your home faster and save tens of thousands in total interest. Monthly payment increases.
30yr → 30yr
Reset your amortization clock to lower the monthly payment. Best when rate drops significantly.
Tony AI
Tony will analyze your current loan and show you estimated refinance options — no commitment, no credit pull.
Start my personalized rate in 60 seconds