Should You Refinance Your Home?

With the lowest mortgage rates in history now tempting anyone paying off a mortgage, many are asking the question, “Should I refinance?” There is no shortage of “rules of thumb” to help you get to an answer: some say you should refinance only if you can lower your interest rate by at least one percentage point; others point out that refinancing makes sense only if you plan to remain in the property for at least five to seven more years.

But there is another way to think about it: how will one mortgage affect your financial bottom line over the next five, ten or however many years you plan to live in your home, factoring in not only the effect on your cash flow, but your wealth, including mortgage equity built, at the end of that period. This, simply put, is achieved by calculating the so-called net benefit, a concept used by my financing partner to help users determine whether refinancing makes sense. The infographic below explains the concept of net benefit in more detail.

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