Thinking About Refinancing? Here’s What You Need to Know
With interest rates coming down, refinancing might sound like a smart move. On paper, it looks great: a lower interest rate and a lower monthly payment. But before you jump in, it’s important to look at the entire picture to make sure refinancing truly benefits you and your family.
Here are a few key things to consider:
1. Refinancing Comes with Costs
Lenders don’t get you into a new loan for free. Typically, refinancing costs 2% to 3% of the total loan amount. These fees cover things like the loan origination, appraisal, title work, and other closing costs. It’s important to factor these expenses into your decision.
2. Restarting the Clock
If you’re four years into a 30-year mortgage and you refinance into a new 30-year loan, you’re essentially resetting the clock. Instead of 26 years remaining, you now have 30 years again. Over the life of the loan, this could mean paying more in total interest—even if your monthly payment drops.
3. Knowing Your Break-Even Point
To see if refinancing makes sense, calculate your break-even point. Divide the total cost of refinancing by your monthly savings.
Example: If refinancing costs you $6,000 and you save $200 a month, it will take 30 months to break even.
If you sell or refinance again before then, you could actually lose money.
4. Watch Out for PMI
Refinancing requires a new appraisal. If your home’s value has shifted and you no longer have 20% equity, PMI (Private Mortgage Insurance) could be added back into your loan. That additional cost may cancel out the savings you expected from refinancing.
✅ Bottom line: Refinancing can be a great tool, but it’s not always the right move. Look beyond the lower interest rate and make sure it truly benefits you long-term.
If you’d like to talk through what refinancing might look like for your situation, we’d love to connect you with one of our trusted lender partners. And of course, if you have any real estate needs at all, don’t hesitate to reach out to us here at Pinnacle Property Group.
