When refinancing makes sense
Most refinances come down to one of five goals:
- A lower rate: rates have dropped meaningfully since you took out your loan.
- Dropping mortgage insurance: you have an FHA loan and now have 20% or more equity, so a conventional loan could remove the monthly premium.
- A shorter term: moving from 30 to 15 years usually brings a lower rate and far less total interest, at a higher monthly payment.
- Fixed instead of adjustable: your ARM is nearing an adjustment and you want a payment that won’t change.
- Cash out: you want to use equity for renovations, hurricane hardening, paying off higher-rate debt, or a down payment on another property.
If none of those apply, the best move is often to keep the loan you have.
The break-even math
Divide your total closing costs by how much you’ll save each month. The result is the number of months before the refinance starts putting money in your pocket.
Example: $6,000 in closing costs ÷ $250 in monthly savings = 24 months. If you expect to keep the loan longer than two years, the refinance likely pays off. If you might sell sooner, it probably doesn’t.
The monthly payment isn’t the whole picture. Restarting a 30-year clock on a loan you’ve paid for eight years can lower the payment while raising the total interest you pay. Compare the total cost over the years you plan to stay, not just the payment.
Rate-and-term vs. cash-out
A rate-and-term refinance changes the rate, the term or both, and the balance stays about the same. It usually gets the best pricing.
A cash-out refinance borrows more than you owe and pays you the difference. Pricing is typically a little higher, and conventional and FHA cash-out loans on a primary home are generally limited to 80% of the home’s value. VA cash-out loans can go higher for eligible veterans.
If you already have a low rate you’d like to keep, a home equity loan or line of credit may be a better way to reach your equity than replacing the whole mortgage.
Streamline options for FHA and VA loans
If you already have an FHA loan, an FHA Streamline refinance can lower your rate with less paperwork and, in many cases, no new appraisal. VA borrowers have a similar option, the Interest Rate Reduction Refinance Loan (IRRRL). Both require a real benefit to you, such as a lower payment, and a history of on-time payments on the current loan.
What Florida adds to closing costs
Florida taxes new mortgage notes. Expect documentary stamp tax of $0.35 per $100 borrowed and intangible tax of 0.2% of the loan amount. On a $400,000 refinance, that’s about $1,400 in doc stamps and $800 in intangible tax, before lender, title and appraisal fees.
Two things a refinance doesn’t change are your homestead exemption and your Save Our Homes assessment cap. Both come from owning and living in the home, not from the mortgage, so refinancing won’t reset your property taxes.
You’ll also need a current homeowners insurance policy, and flood insurance if the home is in a special flood hazard area. Try the mortgage calculator to see a full monthly payment with taxes and insurance.
