The 30-year fixed mortgage rate averaged 6.32% over the past 12 months, according to Freddie Mac. If you locked in higher, refinancing is tempting. But the rate is only half the math.
Find your break-even
Refinancing comes with closing costs. To see whether it’s worth it, divide those costs by how much your monthly payment would drop. The result is the number of months it takes to come out ahead.
[Add a worked example with your own numbers here.]
When waiting makes sense
If you expect to move within a few years, or your new rate would only be slightly lower, the savings may never cover the upfront cost.
Your moveRun the break-even on closing costs before you chase a lower rate.
The bottom line
Divide your closing costs by your monthly savings. If you’ll stay longer than that many months, refinancing can make sense.
Sources
- Freddie Mac Primary Mortgage Market Survey