Key Takeaways
- Closing costs typically run 2-3% of the new loan amount
- Break-even point shows when monthly savings cover upfront costs
- Cash received is immediate even if you move before breaking even
Should I do a cash-out refi if I might move soon?
You're weighing a cash-out refinance but think you might move within a few years. The timing matters because refinancing involves closing costs that you need time to recover through monthly savings or the cash you take out.
Cash-out refinancing replaces your current mortgage with a larger loan, letting you pocket the difference in cash. You'll typically pay 2-3% of the new loan amount in closing costs. If you move soon after refinancing, you might not save enough on monthly payments to offset those upfront costs.
Calculate your break-even point by dividing closing costs by your monthly payment savings. If you plan to move before that break-even date, the refinance might not make financial sense unless you need the cash for something specific. The cash you receive is immediate, but you'll carry a larger mortgage balance when you sell.
People commonly run scenarios comparing their current situation to the new loan terms over different time periods. Share your timeline and goals with the lender, and they can walk you through the numbers for various move-out dates.
