A refinance can slash your payment—or backfire if you reset the clock. Here are seven must-know tips to make sure the math works in your favor.
1 · Look for a 0.75-1 % rate drop
That’s the usual rule of thumb to offset closing costs within 24 months.
2 · Calculate your break-even
Divide total closing costs by monthly savings; if the break-even is under your expected time in the home, green light.
3 · Beware of term reset
Rolling a 26-year remaining balance back into a fresh 30 extends interest. Ask for a 25-year or 20-year amortization instead.
4 · Cash-out cap is 80 % LTV (conventional)
Need equity for remodeling? Conventional cash-outs top at 80 % loan-to-value. VA goes to 90 %, FHA to 85 %.
5 · Float-down option in volatile markets
Rates falling? Pay 0.125 points for a one-time float-down if market dips ≥ 0.25 % before closing.
6 · Shop for zero-cost refi quotes
You’ll take a slightly higher rate, but the lender credit covers fees—great if break-even is uncertain.
7 · Don’t skip appraisal waivers
Fannie/Freddie “PIW” offers can save \$500 and a week of processing time—ask if you qualify.
Quick math: a \$350 k loan dropping from 6.75 % to 5.75 % saves roughly \$230 per month. If fees run \$4 k, break-even is ~17 months.