Lower the rate, or put the equity to work
Rate-and-term, cash-out, HELOC, and HELOAN. I'll run your actual numbers and tell you plainly whether it's worth doing — including when it isn't.
Four ways to restructure
Rate-and-term refinance
Replace your loan with a better one. Lower the rate, shorten the term, or drop mortgage insurance once you've built 20% equity.
- Same balance, better terms
- Common move: 30-year into a 15- or 20-year
- Break-even usually measured in months
Cash-out refinance
A new, larger first mortgage; you take the difference in cash. Usually the cheapest way to borrow a large amount against the house.
- Consolidate higher-rate debt
- Fund renovations or a second property
- One payment, one rate
HELOC
A revolving line against your equity. Draw what you need, when you need it, and pay interest only on the balance you're actually using.
- Leaves a low first-mortgage rate untouched
- Variable rate, flexible draws
- Good for staged projects
HELOAN
A fixed-rate second mortgage in one lump sum. Predictable payment, fixed payoff date, first mortgage stays exactly where it is.
- Fixed rate and fixed term
- One-time lump sum
- Preserves your existing rate
When refinancing is worth it — and when it isn't
The old "refinance if you can drop 1%" rule is not useful. What matters is your break-even: what the refinance costs divided by what it saves you each month. If you'll be in the house comfortably past that point, it makes sense. If you're moving in two years and the break-even is thirty months, it doesn't.
The honest version: I've told plenty of people not to refinance. If your numbers don't work, you'll hear that from me — not a pitch. A relationship that lasts through your next three transactions is worth more than one loan I talked you into.
Things worth weighing
- How long you'll stay. The single biggest input. Past break-even it's savings; before it, it's a cost.
- Resetting the clock. Rolling 22 years remaining back into a fresh 30 lowers the payment but can raise lifetime interest. Sometimes that tradeoff is exactly right — just make it on purpose.
- Dropping mortgage insurance. At 20% equity, removing MI alone can justify the move even without much rate change.
- Keeping a low first mortgage. If your current rate is excellent, a HELOC or HELOAN usually beats a cash-out refinance.
Refinance questions
How much equity do I need?
For a rate-and-term refinance, often very little. For cash-out, most programs want you to keep about 20% equity after the new loan. HELOC and HELOAN limits depend on combined loan-to-value and your credit profile — I'll pull the specific numbers for your situation.
What does a refinance cost?
Typically 2–5% of the loan amount in closing costs. Some of that can be rolled into the loan or offset with a lender credit in exchange for a slightly higher rate. Which structure is better depends entirely on how long you're keeping the loan.
Should I do a HELOC or a cash-out refinance?
Mostly it comes down to your current rate. If you're sitting on a low first mortgage, a HELOC or HELOAN lets you borrow without disturbing it. If your current rate is at or above market, a cash-out refinance consolidates everything into one lower-rate payment.
Can I refinance an investment property?
Yes — rate-and-term and cash-out both. Rates run a bit higher and equity requirements are tighter than a primary residence. DSCR refinances are available if qualifying on the property's rental income works better than qualifying on your tax returns.
Find out what you'd save
Send me your current rate, balance, and payment. I'll come back with real numbers, not a sales pitch.