Every time rates move, the same question comes up:

“Should I refinance now or wait?”

Most homeowners get this wrong—not because they’re careless, but because they’re looking at the wrong metric. The mortgage industry has trained people to focus on one thing only:

The monthly payment.

That’s a mistake.

A refinance is not good or bad on its own. It’s a math and strategy decision. And if you don’t look at it the right way, you can easily save money short-term while losing far more long-term.

This post walks through a simple framework to decide when refinancing actually makes sense—and when it doesn’t.

Step 1: Ignore the Rate. Focus on the Cost

A lower interest rate means nothing by itself.

What matters is how much the refinance costs and how long it takes to recover that cost.

Every refinance has expenses:

• Lender fees

• Third-party costs

• Prepaid interest, taxes, and insurance

• Title and escrow fees

Even “no-cost” refinances aren’t free—the cost is usually built into the rate.

The first question should always be:

“How long does it take for the monthly savings to cover the cost of this refinance?”

That’s your break-even point.

Step 2: Set a Real Break-Even Rule

As a general guideline:

• Under 24 months → Strong refinance candidate

• 24–36 months → Situational (depends on plans and strategy)

• Over 36 months → Usually not worth it

If it takes four, five, or six years to break even, you’re betting that:

• You won’t move

• You won’t refinance again

• Rates won’t change

• Your financial goals won’t shift

That’s a risky bet.

A refinance should pay you back quickly, not lock you into a long recovery period.

Step 3: Don’t Restart the Clock (This Is Where Most People Lose)

One of the biggest hidden mistakes is resetting a 30-year loan.

Example:

• You’re 7 years into your mortgage

• You refinance into a new 30-year loan

• Your payment drops

Sounds good—but you just added 7 years of interest back onto the loan.

A smarter option is often:

• Matching your remaining term (e.g., 23-year fixed)

• Or choosing a shorter term while keeping payments manageable

This preserves your progress and dramatically reduces total interest paid.

Lower payment ≠ better loan.

Step 4: Look at Total Interest, Not Just Monthly Savings

Two refinances can both lower your payment—but have very different outcomes.

One might:

• Save $300/month

• Add $180,000 in lifetime interest

Another might:

• Save $150/month

• Cut $220,000 in total interest

The second loan is objectively better, even though the payment savings are smaller.

If you don’t review long-term interest impact, you’re only seeing half the picture.

Step 5: Factor in How Long You’ll Actually Keep the Home

Refinancing only makes sense if the timeline matches your reality.

Ask yourself:

• Do I plan to sell in the next 2–5 years?

• Is this a long-term hold or a stepping-stone home?

• Could this become a rental later?

Someone planning to sell in two years needs a very different strategy than someone holding the home for 15.

There is no “one-size-fits-all” refinance.

Step 6: Use Windfalls Strategically

Many refinances include:

• A skipped payment

• An escrow refund

Used correctly, these can:

• Offset loan balance increases

• Shorten recoup time

• Keep long-term interest lower

Used incorrectly, they just become extra spending money while the loan balance quietly grows.

Strategy matters.

The Bottom Line

A refinance should do at least one of the following—and ideally more than one:

• Shorten your break-even timeline

• Reduce long-term interest meaningfully

• Improve cash flow without extending the loan unnecessarily

• Align better with your future plans

If it only lowers the payment but costs you more over time, it’s probably not a win.

The best refinance decisions are boring, disciplined, and math-driven—not emotional or headline-driven.

If you’re considering a refinance, make sure you’re solving the right problem, not just chasing a lower number on a monthly statement.