When Does Refinancing at 6.5% Make Sense?
Refinancing at 6.5% makes sense if your current rate is above 7% and you plan to stay in your home long enough to recoup the closing costs — typically 2-4 years.
The 1% rule of thumb: Refinancing is generally worth it if you can lower your rate by at least 1%. At 6.5%, anyone with a rate of 7.5% or higher is a strong candidate.
The break-even point: Divide your closing costs by your monthly savings. If you stay longer than that, you profit. If you move before then, you lose money on the refinance.
When NOT to Refinance at 6.5%
Don't refinance at 6.5% if: your current rate is already at 6% or lower, you're planning to move within 2 years, you're more than 20 years into a 30-year mortgage (most of your payments are now principal, not interest), or your credit score has dropped significantly since your original loan.
Also consider: refinancing resets your loan term. If you have 15 years left and refinance to a new 30-year loan, you'll pay more interest in total even at a lower rate.