Interest in home improvement projects also surged throughout the pandemic. For homeowners who don’t intend on selling, it makes perfect sense. They can upgrade and enjoy the home they’re living in, while also helping to increase its market value if they plan to sell in the future. Cashing out on equity, renovating, and reinvesting in a home is essentially doubling down on this investment.
For homeowners who don’t plan to cash out, there may still be several strong reasons to reassess a mortgage. These include:
- Changing loan terms—i.e., converting from an adjustable to a fixed rate.
- Lowering a monthly payment by lowering an interest rate.
- Removing the added cost of private mortgage insurance (PMI), for those who are eligible.
- Qualifying for better loan terms if a credit score has improved.
- Shortening a loan term, helping to pay off a mortgage sooner.
Of course, it’s still important to weigh the cost and calculate when a refinance will break even. During a refinance, a homeowner is still responsible for paying closing costs. These can range from 2 to 5 percent of a loan’s total. To figure out the breakeven point (the point at which a homeowner will start saving), simply divide the closing costs by the estimated monthly savings.