The idea of paying less in total interest and owning your home sooner is appealing. But will refinancing to shorten your term impact your overall financial plans in a way that works for you?
Refinancing costs and fees have the potential to add up to 2% of the total new loan amount, so it’s important to ask yourself if the savings from the new loan will be equal to or more than the cost of refinancing. Consider the overall cost of refinancing and your "break-even point" – when the closing costs related to the refinance are finally repaid by your monthly savings.
Factors that go into the cost of refinancing include: