When is it worth it to refinance Your Mortgage? - The White Coat Investor - Basics

The basic calculation that you'll want to use to determine if refinancing is worth it is to calculate the total upfront refinancing fees that you'll pay. These fees could include a refinance origination fee, title fees for refinance, or title settlement fees. The upfront refinance fees could represent the total cost of your refinance and could be paid out of your pocket at closing or potentially rolled into the starting balance of your new loan. A common rule of thumb is that it can be worth it to refinance for 1%—if you can drop your interest rate by at least 1%, it might make sense to refinance.

You can also look at the payback period. If you will pay back your upfront refinancing costs in less than 2-3 years, that can be a good indicator that refinancing your mortgage may make sense. Another instance is if you're looking at lowering the term of your mortgage. This can be an attractive option if interest rates have dropped significantly since you first took out your mortgage.

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