Refinancing Your Mortgage

Key Takeaways

• Frame refinancing decisions using a red/yellow/green system: determine your primary goal (cash flow maximization vs. debt payoff speed) before evaluating options, as the 'best' rate doesn't always mean the best choice
• Use the 1% interest rate reduction rule as a starting point to evaluate refinancing, but also factor in closing costs and how long you plan to stay in your home
• Compare total interest savings across different loan terms, not just monthly payments—for example, a 20-year refi at a slightly higher rate saved one couple $61,000 compared to a 30-year option
• Consider alternative strategies like reverse mortgages if you're older and house-rich but cash-poor, as they may eliminate mortgage payments entirely without refinancing
• Pay closing costs out of pocket rather than wrapping them into the loan if financially able, and act quickly since rising bond yields indicate mortgage rates may increase soon