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The Refinance Decision Guide

A Break-Even and Goals Framework for Deciding Whether to Refi.

18-page PDF Homeowners considering a rate-and-term or cash-out refinance.

What’s Inside

The break-even test in one worksheet
Rate-and-term vs cash-out vs streamline
When to shorten your term
Removing PMI through refinancing
How rate locks and floats actually work

Key Takeaways

A printable break-even worksheet
Decision tree for which refi type fits your goal

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Chapter Previews

The full PDF includes worksheets, checklists, and printable versions. Here’s a look at what’s inside each chapter.

Chapter 1

The Break-Even Test in One Worksheet

Break-even is the single most important number in a refinance decision. Everything else is noise.

A refinance replaces your existing mortgage with a new one, and every refinance carries costs - typically $3,000 to $6,000 in lender fees, title, and prepaids. Break-even is the number of months it takes your monthly savings to recoup those costs. If your break-even is 22 months and you plan to stay in the home for 5+ years, the math works. If you're moving in 18 months, it doesn't.

Example: $350,000 Refinance from 7.25% to 6.25%

Current P&I payment: $2,388
New P&I payment: $2,155
Monthly savings: $233
Estimated closing costs: $4,800
Break-even point: ~21 months

Estimate only. Actual costs and rates vary by lender, credit, and program.

Don't count 'skipped payments' as savings. When you refinance, you typically skip one payment - but that interest is added to your new loan balance. It's a cash-flow benefit, not a real savings.

Chapter 2

Rate-and-Term vs Cash-out vs Streamline

Three refinance types, three totally different use cases. Picking the right one changes both the cost and the qualification bar.

Rate-and-term - lower rate, shorter term, or both. No cash taken out. Lowest cost, easiest qualification.
Cash-out - new loan is larger than the existing balance; you receive the difference. Rate is typically 0.25–0.50% higher. Max LTV usually 80% (85% for VA, 100% on some programs).
Streamline (IRRRL / FHA Streamline) - simplified refinance limited to the same loan program. Skips appraisal and often skips income verification. Cheapest and fastest - but restricted to lowering the rate.

Chapter 3

When Shortening the Term Beats Lowering the Rate

Moving from 30 to 15 years is the highest-ROI move most homeowners never make.

15-year mortgages routinely price 0.50–0.75% lower than 30-year loans. Combined with the shorter amortization, borrowers can cut lifetime interest by six figures on a mid-sized loan - while only raising the payment by 30–40%. If you have stable income and can absorb the higher payment, term shortening is often better than chasing a rate drop.

$300,000 Loan: 30-Year at 6.5% vs 15-Year at 5.75%

30-year monthly P&I: $1,896
15-year monthly P&I: $2,491
Payment difference: +$595/mo
Total interest - 30-year: $382,633
Total interest - 15-year: $148,411
Lifetime savings: ~$234,000

Illustrative only. Actual rates depend on credit, LTV, and program.

Chapter 4

Removing PMI Through a Refinance

If your home has appreciated, refinancing can eliminate PMI even before you've paid the balance down.

Conventional loans require PMI whenever your loan-to-value (LTV) exceeds 80%. If your home has appreciated - or you've paid down the balance - a refinance can reset your LTV below 80% and drop the PMI entirely. On a typical $400,000 home, removing PMI saves $150–250 per month, which often pays back the refinance costs on its own inside 24 months.

When a PMI-Removal Refi Makes Sense

Home has appreciated 10%+ since purchase
You have at least 20% equity based on a current appraisal
You'll stay in the home long enough to hit break-even
Prevailing rates aren't significantly higher than your current rate

Chapter 5

How Rate Locks and Floats Actually Work

Locking a rate is a commitment on both sides. Understanding lock periods and float-downs prevents expensive surprises.

A rate lock guarantees your interest rate for a defined period (typically 30, 45, or 60 days) while your loan is underwritten. If rates rise, you're protected. If rates fall significantly, some lenders offer a one-time 'float-down' option - usually at a small cost - that lets you capture a portion of the improvement.

When to Lock

Lock as soon as you're satisfied with the rate and confident the loan will close within the lock window. Trying to time the bottom of the market usually costs more than it saves.

Lock Expiration Options

Extend the lock - typically 0.125–0.25% of loan amount per 15-day extension
Let the lock expire and re-lock at current market rates
Switch lenders - resets the entire process and adds 2–3 weeks

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