Jan 30, 2026 · Josh · 1 min read
Refinancing Myths: When It Actually Costs You More
Direct answer
Is refinancing always a win? No. Guidance indicates closing costs and fees can offset rate savings if the break-even period is long. However, refinancing can still be smart when it shortens the loan term, removes risk, or improves cash flow with a clear plan.
Rate cuts are not free. Here is how to calculate the real cost.
Most refinancing decisions are emotional. The correct decision is math.
The myth: lower rate equals guaranteed savings
A lower rate can still cost more if fees are high or if you move before the break-even point. The right calculation is total cost, not just the headline rate.
The break-even formula
Total refinance fees divided by monthly savings equals the months needed to break even. If you will move before that date, it is a bad deal.
The myth: cash-out is free money
Cash-out refinancing raises the loan balance and can extend the payoff timeline. Use it only if the investment return is clearly higher than the new interest cost.
Related reads
References
FAQ
What is a break-even period?
It is how long it takes for monthly savings to cover upfront refinance costs.
Should I refinance for a small rate cut?
Only if the math works after fees and you plan to keep the loan long enough.
Can refinancing hurt credit?
It can cause a short-term dip from inquiries, but the impact is usually temporary.
About the author
Josh
Finance broker, disciplined trader, and lifter. I document practical systems for risk, training, and discipline so readers can build results that compound.
If this helped you, reach out. I read every message and update the playbook when new data shows up.
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