Refinance Offers: What to Watch Out For as the Market Shifts

Mortgage rates have been trending down, and we’ll probably continue to see them drop. That means you’re about to get blasted with posts from real estate agents and loan officers talking about lower rates.

So…It’s time to dust off some tips on how to know if a refinance really makes sense for you.

1️⃣ Beware of the “Free Refi” Pitch

You’re going to see a lot of ads claiming a “free refinance.” Don’t fall for it. All the costs are still there—they’re just being wrapped into the new loan amount or baked into the terms.

Similarly, if your original lender promised “no lender fees when you refinance within a certain period of time,” they’re likely just rolling those same fees into the loan. It’s a marketing gimmick, not a free deal.

2️⃣ Watch the Costs Carefully

If you’re curious about refinancing, pay very close attention to the closing costs—especially on proposals from your loan servicer.

A common tactic is pairing an enticing loan term with high closing costs. Those costs may be hidden in the fine print or disguised by rolling them into your loan balance.

One-time closing costs generally include:

• Title fees

• Escrow fees

• Lender fees

• Appraisal fee (about $750, unless waived)

In most cases, these range from $3,800–$4,500, depending on your loan size.

💡 Pro tip: Daily interest charges and escrow funds for taxes/insurance shouldn’t be counted as costs—they’re a wash since you’ll get a refund from your current servicer.

3️⃣ How to Calculate if a Refi Makes Sense

The best way to evaluate a refinance is to compare the annual savings against the total one-time costs.

Example:

• Loan Amount: $500,000

• Annual Savings: $5,000

• Closing Costs: $5,000

• Recapture Period: 1 year (cost ÷ savings)

But here’s the catch—if a lender charges points, the recapture period gets longer. I’ve recently seen quotes with an average of 2 points charged (!). That could stretch the recapture period to 3+ years.

4️⃣ Key Questions to Ask Before You Commit

• When might I sell the home or convert it into a rental?

• Could a better opportunity come along soon? (Don’t “lock in” too early and regret it later.)

• Am I trusting the right source for my loan advice?

If your mortgage terms are above 7.0%, it’s worth talking to a trusted mortgage loan officer—not necessarily to refinance right now, but to map out potential scenarios for today and the future.

Every situation is unique. The bottom line? A refinance should improve your overall financial position—not just look good in an ad.

If you have questions—especially about how escrow accounts are handled in Oregon or Washington—reach out. I’m always happy to review offers and walk you through the math.