Refinancing Tips · March 17, 2025
When NOT to Refinance Your Mortgage
Refinancing isn't always the right move. Here are five situations where staying in your current mortgage is the smarter financial decision.
Everyone loves a lower rate. But refinancing isn't always the right move.
1. You're Selling Within 1–3 Years
Closing costs require time to recoup through monthly savings. If you won't hit break-even before your expected sale, skip it. Run the math every time.
2. You're Deep Into Your Current Loan
Mortgages are front-loaded with interest. In year 20 of a 30-year loan, you're mostly paying principal. Resetting to a new 30-year — even at a lower rate — can cost significantly more in total interest paid over the full term.
Always compare: total remaining interest on current loan vs. total interest on proposed new loan.
3. The Rate Difference Isn't Significant Enough
A 0.25% rate reduction on $200,000 saves ~$31/month. If closing costs are $5,000, break-even is 13+ years. Not worth it unless you're certain you'll stay that long.
4. Your Credit Has Declined Since Origination
If your score dropped, you may not qualify for terms better than what you have — or may qualify only at worse terms.
5. You Have a Prepayment Penalty
Some mortgages (less common today) charge penalties for early payoff. Factor any prepayment penalty into the break-even calculation.
A trustworthy lender tells you when refinancing doesn't make sense. HMS sometimes advises against refinancing. Our goal is your long-term success. Call 309-222-8286 for an honest evaluation.