What is the best way to determine if you should refinance a mortgage? Is there a general rule of them as far as difference in interest rates? I know closing costs are also a factor. Is there a good way to determine this without asking a mortgage banker?

3 Answers 3


See the Mortgage Professor's calculators (#3).

Go to bankrate and look up rates so you know what to punch in to those calculators.

  • 4
    Can you explain or summarize? Bare links are not useful answers. Commented May 11, 2015 at 10:45

Our mortgage provider actually took the initiative to send us a refinance package with no closing costs to us and nothing added to the note; took us from a 30-year-fixed ~6.5% note to a 15-year-fixed ~5% note, and dropped the monthly payment in the process. You might talk to your existing lender to see if they would do something like that for you; it gives them a chance to keep your business, and it cuts your costs.

  • Yes, but do the math. It could pay more in the medium term (1-3 years) to deal with closing costs.
    – bstpierre
    Commented Aug 5, 2010 at 3:48
  • Definitely run the numbers, but we weren't hunting for refinancing; this was a clear win over the status-quo with very little time and effort. For someone actively looking to refinance, I'd expect the current lender to aim to be competitive.
    – retracile
    Commented Aug 5, 2010 at 3:55
  • You are now 2 years into a 15 yr loan. Rates have dropped to ~ 3.5% for a 15 and you may find lower still for a 10. Wonder if you've refinanced since your post. Commented Sep 1, 2012 at 16:24
  • 1
    @JoeTaxpayer; Excellent question. No, we haven't. With our current plan, we'll pay off the mortgage in 2.5 years. Refinancing from 5% to 3.5% would save us $800 over the remainder of the loan. I'm assuming that refi fees would exceed that. (Note that our current plan is paying significantly more pre month than is required, and paying off the note when the principle reaches 12x what we're paying monthly. Comparison is based on same plan, different interest.)
    – retracile
    Commented Sep 22, 2012 at 1:02

Yes, take the new rate, but instead of using the new 30 year term, calculate the payment as though the new mortgage were at the remaining term. 3 years into a 30? You calculate the payment as if the new mortgage were 27 years. This will tell you what you are really saving. Now, take that savings and divide into your closing costs if any. That will give you the break even. Will you be in the house that long? If you can find a no closing cost deal, it's worth it for even 1/8% savings.

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