3 Simple Steps to Assess the Value of Refinancing Your Home
You can lower your payment and maybe retire your mortgage sooner.
Step 1
Check www.mortgagemarvel.com to see how low a rate you could get and how much you’d pay in closing costs. Forget the rule of thumb that to refinance your mortgage you need to reduce your rate by two percentage points. The question is whether you will stay in your home long enough to recoup the closing costs with savings on your monthly payments. You will need at least 5% equity in your home to qualify, and lenders may require a minimum credit score of 660 if you have less than 25% equity. The higher your score, the better your rate.
Step 2
For a rough idea of how long it will take to break even, before you will realize any savings, subtract the new monthly payment from your current one and divide that into the total closing costs. For a more accurate picture, use the Mortgage Professor’s refi calculator, which also factors in unrealized interest on your closing costs and lost mortgage-interest tax deductions, resulting in a longer break-even period. Say you have a 30-year, $200,000 mortgage at 4.8% and can refinance at 4%. According to the calculator, you’d lower your monthly payment of principal and interest from $1,146 to $984, assuming you finance the estimated $6,000 in closing costs. It would take 70 months to break even.
Step 3
You can lower your rate even more and cut the payoff time in half with a 15-year mortgage, but your monthly payment won’t be as low. Or ask the lender to set a payback period equal to the number of years remaining on your old mortgage, and it will adjust the payments to reflect the term.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The payoff
You’ll lower your payment and maybe retire your mortgage sooner.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
What the Capital One Discover Merger Means for Your Wallet
The Capital One Discover merger reshapes the credit card landscape and could impact your credit card rewards, interest rates and card perks.
By Paige Cerulli
-
My Advice for Enrolling in Medicare Part B — Based on Experience
Enrolling in Medicare is notoriously complicated and can result in penalties if you get the timing wrong. Here are some valuable tips for first-timers.
By Sandra Block
-
Roth IRA Contribution Limits for 2025
Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
By Jackie Stewart
-
How to Search For Foreclosures Near You: Best Websites for Listings
Making Your Money Last Searching for a foreclosed home? These top-rated foreclosure websites — including free, paid and government options — can help you find listings near you.
By Bob Niedt
-
Luxury Home Prices Rise as the Rich Dodge High Mortgage Rates
Luxury home prices rose 9% to the highest third-quarter level on record, Redfin reports, growing nearly three times faster than non-luxury prices.
By Kathryn Pomroy
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross
-
Five Ways to a Cheap Last-Minute Vacation
Travel It is possible to pull off a cheap last-minute vacation. Here are some tips to make it happen.
By Vaishali Varu
-
How to Figure Out How Much Life Insurance You Need
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life insurance needs.
By Kimberly Lankford
-
Amazon Big Deal Days Is Coming! We’ve Got All the Details
Amazon Prime To kick off the holiday season with a bang, Amazon Big Deal Days runs Tuesday, October 8 and Wednesday, October 9.
By Bob Niedt
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker