Should you refinance?
Refinancing only makes sense if it saves you money over the time you'll keep the loan, or if it gives you access to cash you actually need. The math comes down to one number: your break-even point — how many months it takes for the lower payment to recover the closing costs.
If you'll stay in the home longer than break-even, refinancing pays off. If you'll move before then, the closing costs cost you more than the rate savings. Use our break-even calculator → to see your exact number in 30 seconds.
The two types of refinance
Rate-and-term refinance
You replace your existing loan with a new one — usually for a lower rate, a shorter term, or both. You're not pulling cash out; the new loan amount is roughly the same as your current balance plus closing costs.
When it makes sense:
- Rates have dropped 0.5%+ below your current rate
- You want to switch from a 30-year to a 15-year (or vice versa)
- Your credit improved significantly since you bought
- You want to drop FHA mortgage insurance by refinancing into a conventional loan once you have 20% equity
Cash-out refinance
You replace your existing loan with a new, larger one and take the difference in cash at closing. Useful for home improvements, debt consolidation, or large planned expenses.
When it makes sense:
- You have substantial equity (most lenders cap loan-to-value at 80% on cash-out)
- The mortgage rate is lower than your other debt (credit cards, personal loans, HELOCs)
- You're using the money for something that retains value or generates returns (renovations, education, business)
A cash-out refinance is not free money — you're trading equity for cash and taking on a longer payoff timeline. We'll always show you the total interest cost over the life of the loan, not just the monthly payment.
The break-even math, simply
Three numbers tell you everything:
- Monthly savings. Old monthly P&I − new monthly P&I.
- Closing costs. Lender fees, title, appraisal, prepaid taxes/insurance — typically 2–4% of the loan amount in Michigan.
- Break-even months. Closing costs ÷ monthly savings.
Example. You refinance a $250,000 balance from 7% to 5.75%. Old P&I: $1,663. New P&I: $1,459. Monthly savings: $204. Closing costs: $5,000. Break-even: 25 months. If you stay in the home longer than 2 years, you come out ahead.
This calculation ignores the time value of money and tax effects, but it's the right first-cut number. Run your own numbers here →.
Loan programs available for refinance
Conventional refinance
Standard rate-and-term or cash-out for credit 620+. Up to 80% loan-to-value on cash-out, 95–97% on rate-and-term.
FHA Streamline
If your current loan is FHA, the streamline lets you refinance with reduced documentation and no new appraisal. Fast, lower-cost.
VA IRRRL
Interest Rate Reduction Refinance Loan for veterans with an existing VA loan. No appraisal in many cases, no income re-verification.
HELOC
Home Equity Line of Credit — keep your first mortgage, draw cash from equity as needed. Variable rate. Better than cash-out when your first mortgage rate is already low.
Bank Statement / DSCR
Self-employed or investor? We refinance using bank statements or property cash flow instead of tax returns.
Jumbo refinance
For loan amounts above $806,500 (the 2026 conforming limit in Wayne County). Stricter credit and reserve requirements.
The refinance process
- Application (15 min). We pull credit, take basic income/asset info, and quote rates.
- Decision (1 day). You see the new payment, closing costs, break-even, and monthly savings side by side. No pressure.
- Lock or float. If you proceed, you decide whether to lock the rate now or float for a better number.
- Underwriting (2–4 weeks). Income verification, appraisal (or appraisal waiver if eligible), title work.
- Closing (1 hour, in person or remotely). Sign loan documents. There's a 3-day right-of-rescission on owner-occupied refinances — your loan funds 3 business days after signing.
Total timeline: typically 30–45 days from application to funded.
Michigan-specific notes
Title insurance. Michigan requires title insurance on every refinance. Costs are regulated and roughly proportional to the loan amount.
Property tax escrow. If you have an escrow on your current loan, you'll get a refund of any unused balance about 30–45 days after closing. The new loan starts a fresh escrow.
Recording fees. Wayne County and other Michigan counties charge a flat recording fee that gets included in your closing costs.
Frequently asked questions
How much does it cost to refinance?
Typically 2–4% of the loan amount in closing costs. On a $300,000 refinance that's $6,000–$12,000. You can usually roll closing costs into the loan amount instead of paying out of pocket, which raises your loan slightly but saves cash at closing.
Do I need an appraisal?
Sometimes. For FHA Streamlines and VA IRRRLs, no appraisal is required. For conventional refinances, lenders often offer an "appraisal waiver" if you have strong equity and a clean payment history — that saves $500–$700 and 1–2 weeks.
How low does my rate need to be to make refinancing worth it?
The old "1% rule" (only refinance if you can drop your rate 1%) is outdated. The right answer is whatever drops your break-even below the time you'll stay in the home. Some refinances make sense at 0.375% lower; some don't make sense at 1% lower.
Will refinancing hurt my credit?
The hard inquiry from a mortgage application typically drops credit 3–5 points temporarily. Multiple mortgage inquiries within 14–45 days are bundled into a single inquiry by the credit bureaus, so shopping doesn't compound the impact.
Can I refinance if I'm self-employed?
Yes. Conventional refinances usually require two years of tax returns. We also offer bank statement and DSCR refinance programs for borrowers whose tax returns don't reflect their full income.
How soon after buying can I refinance?
Most loans require 6 months of seasoning before refinancing (12 months for cash-out on some programs). FHA Streamline requires 7 months. We'll check your specific timeline up front.
Get your numbers
Run the math first, then decide. Get a free quote with monthly savings, closing costs, and break-even — no commitment.
