How to Money · Monday, August 10, 2026
The hosts suggest Mike focus on the refinance's break-even point rather than a specific rate drop percentage. They recommend calculating how long it will take for the monthly savings to offset the closing costs, suggesting that a payback period of less than two years, ideally one year or less, is a good target.
“And the reason I want to put it in this framework is because I've been thinking about cars a lot recently, and I'm like, ooh, okay, here's an affordable car gets this kind of gas mileage. Oh, here's the hybrid version of that same car. It gets ten fifteen, twenty miles per gallon better. Okay, what are the energy costs. Assuming I don't ten twelve thousand a year, what's the payback period? Like how many years will it be before we have earned that money back in monthly savings, and how much we're it is costing us at the gas station and Mike in a similar way. I think that that is how you should be thinking about this, because I don't know. Maybe for some folks a car, I don't know, maybe folks are thinking less about the payback period there because I'm like, I'm gonna keep the car. At least that's how I think about cars.”
“But when it comes to houses, I don't know. There could be things that come up that cause you to move, So you need to think through how long are y'all going to stay there in that house? Sounds like you're closer to family, which might mean this is more of a permanent kind of move as opposed to like, all right, we're just gonna move here for a little bit for work. And if you know that it's going to be permanent, okay, then think through how many years is it? Or months? Months? Is even better? Yes, because let's say it takes you a year, Okay, that's good. Let's say it takes you two years. Ah, I don't know. You might need to, you might need to start looking ahead because I think like that's a rule of thumb that you'll see out there two years. And I think that's because for a lot of folks, they can look two years into the future and say, yeah, we're going to be here for the rest you know, another year and then into the second year. But beyond that, it's hard to put your finger on what exactly it is that you're going to do from a work perspective.”
“And that's because a REFI is expensive, right, Like, yes, it costs so much money and it's a pain in the butt to go. On average two to five percent of what you're refinancing. So depending on the size of the house or the cost of the house, it could Be a lot of money and a lot of people in the past, the suggestion has been this kind of rule of thumb, one percent interest rate drop, that that's how you know that it's probably a good idea to pull the trigger.”