When refinancing actually pencils — break-even math, fee recapture, the 15bps rule

Break-even months = total closing costs ÷ monthly savings. If a refi costs $6,000 and lowers the monthly payment by $250, break-even is 24 months. If you'll sell or refi again before then, the refi loses money.

An industry heuristic: if the market rate moves up by more than ~15 basis points between application and rate lock, the borrower has typically lost more than the cost of locking earlier. The rule is most useful inside a 30–60 day window — beyond that, rate volatility dominates. Use it as a sanity check, not a price guarantee.

Origination (0.5–1.5% of loan), discount points (optional), appraisal ($500–$800), title insurance ($1,000–$3,000 depending on state), recording fees, prepaid taxes/insurance, and a new escrow setup. Total all-in costs typically run 2–4% of the loan amount per Freddie Mac and CFPB Loan Estimate data.

Rate-and-term swaps the existing balance into a new loan at a different rate or term. Cash-out adds borrowed equity to the new balance — useful when you need the cash but priced at the same (often higher) rate as a purchase loan. Cash-out interest is generally tax-deductible only on home-acquisition or substantial-improvement portions (IRS Pub 936, post-TCJA).

Most loans have no legal limit, but lenders often require a seasoning period (typically 6 months) before they'll consider a refinance, and some streamline programs have specific waits. FHA Streamline requires 210 days from closing. VA IRRRL requires 210 days AND 6 consecutive on-time payments. Stacking refis without enough seasoning often disqualifies you from the best programs.

On owner-occupied residential mortgages originated after 2014, Dodd-Frank limits prepayment penalties — most lenders simply don't charge them. They're still common on (a) auto loans (typically a small percentage of remaining interest), (b) some business loans, and (c) commercial mortgages. Always check the note's prepayment clause before refinancing.

Yes, up to the same TCJA limits ($750K of acquisition indebtedness for loans originated after Dec 15 2017, $1M for grandfathered loans). On a cash-out refi, only the portion used to acquire or substantially improve the home is deductible — cash taken out for other uses isn't. Reference: IRS Publication 936.

Yes. A new loan starts at month 1 of its amortization. That's why a low-rate 30-year refi 5 years into an existing 30-year loan can produce a lower monthly but MORE lifetime interest — you're now paying interest for 35 years total. The fix is to refinance into a shorter term (e.g. 20- or 15-year) and capture the rate drop without resetting the clock.

Typically yes if (a) the new APR is 1.5–2+ percentage points below the current APR, (b) remaining term is 24+ months, and (c) no significant prepayment penalty applies. Auto refi closing costs are low ($75–$300 in most states), so break-even is usually fast. The trap is extending the term to lower the monthly — that often raises total interest despite the lower rate.

When (a) the new APR is at least 15 points below an MCA's effective amortizing APR, OR 1.5+ points below a term loan's rate, AND (b) the new monthly payment is lower than the current debt service, AND (c) closing costs amortize inside 18 months at the new payment delta. SBA refi guidelines explicitly require 10%+ monthly payment improvement.