With rates ~6.5–7.0% as of 2026, refinancing is a more nuanced decision than it was a few years ago. The math only works if your savings outweigh the costs. Here is how I help homeowners decide whether a refi makes sense right now.
What refinancing is
A refinance pays off your existing loan with a new one. Homeowners refinance to lower their rate, change their term, switch loan types, remove mortgage insurance, or tap equity. The new loan comes with its own closing costs, which is why timing and break-even matter.
The break-even concept
The core question is: how long until your monthly savings repay the cost of refinancing? If a refi costs several thousand dollars and saves you a few hundred a month, divide the cost by the monthly savings to estimate the break-even in months. If you will stay past that point, it can make sense.
Rate-and-term vs cash-out
- Rate-and-term: change your rate or term without taking cash out.
- Cash-out: borrow more than you owe and take the difference in cash.
- Cash-out increases your loan balance and usually your payment.
- Each serves different goals.
Why timing matters at current rates
When rates are elevated, fewer homeowners benefit from a rate-lowering refi, especially if their existing rate is lower than today's. But refinancing is not only about rate — removing mortgage insurance, consolidating debt, or changing terms can still justify a refi for some owners.
Questions to ask first
- What is my current rate versus today's rate?
- What are the total closing costs?
- What is my break-even point in months?
- How long do I plan to stay in the home?
A local note
Some Simi Valley owners who bought when rates were higher may benefit if rates ease, while those with very low pandemic-era rates usually should not give them up for a higher rate. The right answer is personal, and I am happy to connect you with a lender to run your numbers.
Frequently Asked Questions
When does refinancing make sense?
Refinancing makes sense when your monthly savings will outweigh the closing costs within a reasonable time — your break-even point — and you plan to stay in the home long enough to benefit. It can also make sense to remove mortgage insurance or change terms. With current rates, the math is case-by-case; confirm with a lender.
How do I calculate my refinance break-even?
Divide the total closing costs of the refinance by your estimated monthly savings. The result is roughly how many months until the refinance pays for itself. If you plan to stay past that point, refinancing may be worthwhile. A lender can give you precise figures based on your loan and current rates.
What is the difference between rate-and-term and cash-out refinancing?
A rate-and-term refinance changes your interest rate or loan term without taking cash out. A cash-out refinance borrows more than you owe and gives you the difference in cash, increasing your balance and usually your payment. Rate-and-term aims to save money; cash-out accesses equity. Each serves different goals.
Should I refinance if I have a very low rate?
Usually not for a lower rate, since today's rates are higher than recent lows. Giving up a very low rate for a higher one rarely makes sense. However, other goals — removing mortgage insurance or changing terms — could still justify a refi for some owners. Run the numbers with a lender first.
Does refinancing have closing costs?
Yes. A refinance is a new loan with its own closing costs, which can include lender fees, title, escrow, and more. These costs are central to the break-even calculation. Some lenders offer credits that reduce upfront costs in exchange for a higher rate. Review the Loan Estimate to see the full costs.
Can refinancing remove my mortgage insurance?
Sometimes. Refinancing from an FHA loan into a conventional loan can remove FHA mortgage insurance once you have enough equity, and refinancing a conventional loan can drop PMI if your equity has grown. Whether it is worth the closing costs depends on your numbers. A lender can model the savings for you.
