The Truth About Refinancing: How to Know if It’s the Right Move

Mortgage rates are finally trending downward. While the pace isn’t as fast as many homeowners might hope, the shift is opening the door for more people to start asking the question: Is now the right time to refinance?

At Pure Funding, we talk to clients every day who are weighing this decision. Refinancing can be a powerful tool to reduce your monthly payment, shorten your loan term, or tap into home equity but, it’s not always the slam dunk it’s marketed to be. Let’s break down the key things you need to know.

The Old Rule of Thumb: 1% Lower = Good Time to Refinance

Traditionally, the guidance has been simple: if you can lower your rate by at least one percentage point (say, from 7.5% to 6.5%), it’s probably worth refinancing. That rule still holds value, it’s a solid benchmark.

But interest rates aren’t the whole story.

The Better Rule: Recoup Your Costs in 12–24 Months

A smarter way to measure whether refinancing makes sense is to ask: How long will it take me to break even on the costs of the refinance?

• ✅ If you can recover your costs in 12–24 months, refinancing is generally a good move.

• ✅ If you can recover them in less than 12 months, that’s a great deal.

For example, one of our clients recently refinanced with closing costs under $3,000. Their monthly savings added up quickly, and they’ll recoup their costs in just 10 months after that, the savings go straight into their pocket.

Watch Out for Hidden Costs

Here’s where things get tricky. Some lenders market ultra-low rates that look great on the surface. But when you dig into the details, they require you to buy down the rate with points. In some cases, it could take 48 months or more to break even.

Other “surprise costs” to keep in mind:

• Escrows for taxes & insurance – Not truly a cost, but they can increase your cash to close.

• Payoff surprises – Your actual payoff amount could be higher than your last statement due to accrued interest.

• Points, origination fees, and processing charges – These vary widely by lender and can make or break the deal.

👉 Pro tip: Don’t rely on a cost sheet. Ask your lender for an official Loan Estimate—this document is regulated and holds lenders accountable for what they disclose.

Factor in Your Long-Term Plans

How long do you plan to stay in your home? If this is your “forever home,” you may be comfortable with a longer break-even timeline. But if you’re likely to sell or move in the next couple of years, refinancing may not pencil out.

The Bottom Line

Refinancing can be a smart financial move, but it’s not one-size-fits-all. The right decision depends on your rate, your loan costs, how long you’ll stay in your home, and your overall financial goals.

At Pure Funding, we believe the best first step is building a mortgage plan, a clear picture of your current situation, your goals, and where today’s market fits in. That way, you can move forward with confidence and no surprises.

💬 Thinking about refinancing or just curious if the numbers make sense for you? Reach out to our team. We’ll run a personalized analysis and provide a true Loan Estimate so you can see the full picture.