The Refinance Math: Should You Do It?
Refinancing to 8.5% makes sense if — and only if — your monthly savings exceed your closing costs before you plan to sell or move. Here's the complete breakdown for a $350,000 loan:
| Current Rate | Current Payment | New Payment (8.5%) | Monthly Savings | Breakeven | Verdict |
|---|---|---|---|---|---|
| 7.5% | $2,447 | $2,691 | $-244/mo | 999 months | ✗ Probably Not |
| 7.0% | $2,329 | $2,691 | $-363/mo | 999 months | ✗ Probably Not |
| 6.5% | $2,212 | $2,691 | $-479/mo | 999 months | ✗ Probably Not |
| 6.0% | $2,098 | $2,691 | $-593/mo | 999 months | ✗ Probably Not |
🏦
Licensed Banking Professional
23 Years · Mortgage Specialist
The rule I used for 23 years: refinance if you save at least $200/month AND your breakeven is under 24 months. Anything under $100/month savings is rarely worth the hassle and closing costs — even if the math technically works.
The True Cost of Refinancing
Most people focus only on the new rate and ignore refinancing costs. Typical refinance costs include:
- Origination fee: 0.5-1% of loan amount
- Appraisal: $400-800
- Title insurance: $500-1,500
- Recording fees: $100-400
- Total typical cost: $3,000-10,000
When Does Refinancing to 8.5% NOT Make Sense?
- You plan to sell or move within 2-3 years (won't hit breakeven)
- You're more than 20 years into your mortgage (most payment is principal now)
- Your current rate is already within 0.5% of 8.5%
- Your credit score dropped since original mortgage (may not qualify for 8.5%)
✓ When to Definitely Refinance to 8.5%
Your current rate is 7.5%+, you plan to stay 5+ years, your credit score is 720+, and you have equity above 20%. This is a clear win.
→ Calculate Your Personal Breakeven
Use our mortgage calculator to see exactly how much you'd save with your specific loan balance and current rate.