Process
Refinance
Replacing your existing mortgage with a new one — to lower the rate, change the term, or pull out cash — which restarts the loan and carries its own closing costs.
What does refinance mean?
Refinancing swaps your current mortgage for a new loan, usually to cut the rate, shorten the term, or tap equity.
It isn't free even at a lower rate: a new loan restarts the amortization schedule at its most interest-heavy point and carries $3,500–$6,000 in Michigan closing costs. The decision comes down to break-even — how many months of savings it takes to recoup those costs.
How break-even works
Say refinancing costs $4,500 and lowers your payment by $150 a month. Divide $4,500 by $150 and your break-even is 30 months — two and a half years to recoup the cost.
Stay in the home past that point and the refinance saves money; sell or refinance again sooner and you've paid to lose ground.