Mortgage Strategy Guide: When to Refinance, Re-amortize, or Stay Put

Mortgage decisions are among the largest financial choices homeowners make. This guide provides a practical decision tree to help you decide whether to refinance, re-amortize, or keep your current mortgage based on rate spreads, costs, and your time horizon.

Key concepts

Refinancing replaces your existing mortgage with a new loan, potentially lowering the interest rate or changing term length. Re-amortization (or recasting) keeps the loan terms and rate but reduces monthly payments by re-spreading the remaining balance after a large principal payment. Each option has trade-offs.

When to refinance

• Rates are significantly lower than your current rate — a common rule-of-thumb is at least 0.75% to 1.0% improvement for conventional mortgages when accounting for closing costs.
• You plan to stay in the house long enough to break even on closing costs. Calculate the break-even point by dividing closing costs by monthly savings.
• You want to change the loan term (e.g., move from 30-year to 15-year) and can handle higher monthly payments for faster equity accumulation.

When to re-amortize

Re-amortization makes sense if you have a large one-time principal payment (like a bonus or inheritance) and want to reduce monthly payments without paying refinancing costs. Not all lenders offer recasting, and it usually requires a fee, but the cost is typically much lower than refinancing.

When to stay put

If current rates are only marginally better, closing costs are high, or you expect to move within the break-even period, staying put may be optimal. Also consider the non-financial benefits of stability and avoiding paperwork and appraisal processes.

Decision checklist

1. Calculate current monthly payment and interest rate.
2. Get quotes for refinancing, including APR and closing costs.
3. Compute monthly savings and break-even period.
4. Assess time horizon: will you stay past the break-even date?
5. Consider re-amortization if you want reduced payments and have a one-time lump sum.

Additional considerations

• Credit score impact: Shop rates within a short window to minimize credit pulls.
• Loan features: Does your current loan have prepayment penalties?
• Tax implications: Mortgage interest is still deductible for many taxpayers, but consult a tax advisor for your circumstances.

"The right mortgage move depends less on market timing and more on your personal timeframe and cash flow needs."

Example scenario

If you have a 30-year mortgage at 4.5% with 25 years remaining and rates drop to 3.0%, refinancing to a comparable term could save several hundred dollars per month. If closing costs are $3,500 and monthly savings are $300, the break-even is about 11–12 months. If you plan to live in the home longer than that, refinancing likely makes sense.

Conclusion

Refinancing, re-amortization, and staying put are valid strategies depending on rate spreads, closing costs, and your time horizon. Use the decision checklist and run the numbers before acting. Sometimes the most valuable move is the one that aligns with your broader financial plan — not the one that generates the biggest headline savings.