Should You Refinance Your Mortgage?
5 min read · Last reviewed July 1, 2026
Refinancing means replacing your current mortgage with a new one, usually to get a lower interest rate, a smaller monthly payment, or a different term. It can save a lot of money — or quietly cost you — depending on the details.
This guide covers when refinancing tends to make sense, how to find the break-even point that tells you whether it's worth it, and the common traps that can wipe out the savings. It's general information, not personalised financial advice.
When refinancing makes sense
The classic reason is a meaningful drop in interest rates since you took out your mortgage — a lower rate reduces both your payment and the total interest you'll pay. Improving credit or a stronger financial position can also qualify you for better terms.
Other motives include switching from a variable to a fixed rate for stability, shortening the term to clear the debt sooner, or — more cautiously — releasing equity. The right answer depends on which of these you're actually trying to achieve.
Finding your break-even point
Refinancing isn't free: expect fees for arrangement, valuation, and legal work, sometimes several thousand. The key calculation is the break-even point — the closing costs divided by your monthly saving.
If refinancing costs 3,000 and saves 150 a month, you break even in 3,000 ÷ 150 = 20 months. If you'll stay in the home comfortably longer than that, the numbers favour it; if you might move sooner, they may not.
Traps to watch for
Beware of resetting the clock. Refinancing a mortgage you're 8 years into back to a fresh 30-year term can lower the monthly payment while increasing the total interest you pay over the life of the loan.
Also watch for fees rolled into the new balance (you pay interest on them for years), early repayment charges on your existing mortgage, and offers that look cheaper only because the term is longer. Compare the total cost, not just the monthly figure.
Frequently asked questions
▶When is refinancing a mortgage worth it?
When the monthly saving recovers the closing costs before you'd move or repay — your break-even point — and ideally when you're not stretching the term so far that total interest rises.
▶How do I calculate the break-even point on a refinance?
Divide the total refinancing costs by the amount you'll save each month. Costs of 2,400 with a 200 monthly saving break even in 12 months; staying longer than that means the refinance pays off.
Try the calculators
See your monthly savings and break-even point when refinancing a mortgage or loan to a lower rate.
Open calculator →Estimate your monthly mortgage payment, total interest, and payoff cost from the home price, deposit, rate, and term.
Open calculator →Calculate your DTI ratio — the number lenders use to decide how much you can borrow.
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