Refinance or Hold? How to Decide if Refinancing Is Right for You

If you’re a homeowner, you’ve probably heard a lot about refinancing—especially when interest rates start to dip. But is it the right move for you? The answer isn’t always as simple as “lower is better.” Let’s walk through some key questions and tips to help you decide whether to refinance or hold your current mortgage.

1. Compare Your Current Rate vs. Market Rates

This is the starting point. Take a look at your current mortgage rate and see how it stacks up against the rates being offered today. If today’s rates are significantly lower, refinancing could mean big savings. For example, dropping from a 6% to a 5% interest rate on a $300,000 loan could save you over $150 each month—that’s nearly $2,000 a year!

2. Estimate Closing Costs & Your Break-Even Point

Refinancing isn’t free. There are closing costs—typically 2% to 5% of your loan amount. To see if refinancing makes sense, calculate your break-even point: divide your total closing costs by the amount you’d save each month. If you’ll recoup those costs in a few years, refinancing might be worth it. But if you’re planning to move soon, those upfront costs could outweigh your savings.

3. Consider How Long You’ll Stay in Your Home

Your timeline matters. If you’re planning to stay in your home for many years, even a small rate drop can add up to thousands saved over the life of your loan. But if you might move in the next couple of years, you may not save enough to make refinancing worthwhile.

Tip: Small Rate Drops Can Lead to Big Savings

It’s easy to overlook a modest rate reduction, but even a 0.5% drop can have a big impact over time. However, refinancing only makes sense if it fits your bigger financial picture. Think about your long-term goals, your job situation, and whether you might want to tap into your home equity for other needs.

Final Thoughts

Refinancing can be a powerful tool to lower your payments or pay off your mortgage faster—but it isn’t a one-size-fits-all solution. Take a close look at your numbers, your plans, and your peace of mind. If you’re still unsure, consider chatting with a mortgage advisor who can help crunch the numbers for your unique situation. Whatever you decide, you’ll know you made the choice that’s right for you and your home.