Should I Refinance My Mortgage?
I get some version of this question every week. Someone hears about refinancing from a friend, a headline or their own growing pile of bills, and they want to know if it's the right move. My answer is always the same: it depends on the numbers, not the idea.
Refinancing means replacing or restructuring your existing mortgage — to access equity, consolidate debt, lower your rate or change the structure of your payments. It's a useful tool. But a tool isn't automatically the right one just because it exists. The question I ask isn't "Can you refinance?" Almost anyone with enough equity and income can. The real question is "Should you?"
The test that actually matters
A refinance is worth doing when it improves your financial position. That's it. Not when it feels productive, not when it lowers a payment on paper, and not simply because the equity is sitting there. I look at where you are today — your balance, rate, remaining term and payment — against where the new mortgage would leave you, including what it actually costs to get there.
Penalty first, savings second
Breaking your mortgage can cost money. That doesn't necessarily mean it's a bad idea. Every existing mortgage carries a penalty for breaking it early, along with some transaction costs to set up the new one. Before we talk about what a refinance could accomplish, we work out what it costs to get there. Then we weigh that cost against the benefit — lower interest, better cash flow, consolidated debt, whatever you're trying to achieve. If the penalty and costs outweigh what you'd gain, the math tells us to leave things alone. If they don't, it may be worth making the change.
When I would not recommend it
There are a handful of situations where refinancing usually doesn't make sense, and I'll tell you plainly when I see them:
- The penalty outweighs the potential savings.
- The new structure increases your long-term borrowing cost without a good reason.
- Debt is being consolidated without a realistic plan to pay it down.
- The equity is being used for something that doesn't actually improve your position.
- You're likely to sell the property soon.
- Your existing mortgage has features — rate, portability, prepayment privileges — worth keeping.
- There's simply no meaningful advantage to making a change.
None of those are moral judgments. They're just what the numbers tend to show.
What "improving your position" actually looks like
Sometimes it's a lower rate that reduces your total borrowing cost. Sometimes it's consolidating higher-interest debt into your mortgage so your monthly obligations make sense again. Sometimes it's freeing up equity for a renovation or an investment property with a clear return. And sometimes, after we run the numbers, the answer is that your current mortgage is still the right one. I'd rather tell you that than talk you into a transaction that doesn't help you.
If you're weighing whether a refinance makes sense for you, let's look at your actual numbers — the penalty, the costs, the new structure and what it would really do for your financial position.