When you are sitting across from a loan officer or scrolling through refinance offers online, the numbers they show you rarely tell the whole story. Most lenders focus on monthly payment reductions or interest rate drops without explaining how those figures actually translate into real savings over time. That is a problem, especially when you are trying to make a decision that could affect your family's financial security for the next decade or more.

TL;DR: Refinancing your mortgage to pay off debt can save you tens of thousands of dollars, but only if you understand the complete math behind the decision. This guide walks you through the calculations lenders often skip, helping you determine whether refinancing makes sense for your specific situation.

If you are like many Michigan homeowners I work with, you have probably wondered whether refinancing is worth the hassle. You have seen the headlines about rates dropping, heard neighbors mention they refinanced, and maybe even received a few too many mailers promising incredible savings. But something holds you back. Maybe it is the uncertainty about whether rates will keep falling. Maybe it is concern about closing costs eating into your savings. Or maybe you just do not trust that the numbers you are being shown are the full picture.

Those concerns are valid. And honestly, they are exactly why I wrote this guide.

Why the Standard Refinance Pitch Falls Short

Here is what typically happens when you inquire about refinancing. A lender shows you two numbers: your current monthly payment and your potential new monthly payment. The difference looks attractive. You might save $100, $150, or even $200 per month. Sounds great, right?

But that snapshot misses critical details. It does not account for closing costs, which can range from 2% to 6% of your loan amount. It does not factor in how long you plan to stay in your home. It does not consider whether rolling closing costs into your new loan actually erases your savings. And it certainly does not explain the total interest you will pay over the life of the loan.

Let me show you what I mean with real numbers.

The Real Math Behind a Half-Point Rate Reduction

Let us say you purchased a home at the median Michigan price and financed $360,450 at a 7% interest rate. That was a common scenario for buyers between 2023 and 2025 when rates were stubbornly high.

Your current situation at 7%:

• Monthly payment: $2,398.08

• Total interest over 30 years: $502,860

Now imagine you refinance to a 6.5% rate. That is just a half-point reduction.

Your new situation at 6.5%:

• Monthly payment: $2,278.29

• Total interest over 30 years: $459,734

The monthly savings? About $120. That might not sound life-changing. But look at the total interest savings: $43,126 over the life of the loan.

That is real money. That is a college fund. That is home improvements. That is financial breathing room for your family.

But Wait. What About Closing Costs?

This is where most homeowners get stuck, and rightfully so. Closing costs are not pocket change. On a $360,450 loan, you could be looking at anywhere from $7,200 to $21,600 depending on the lender and your specific situation.

Let us use the higher end of that range to be conservative. Even if you pay $21,600 in closing costs, you are still saving over $21,500 after accounting for those expenses. And if you find a lender with lower closing costs or one that rolls them into your loan, your net savings increase significantly.

The key is running these numbers for your specific situation before making a decision.

The Break-Even Point: When Refinancing Actually Pays Off

Here is a calculation most lenders skip entirely: your break-even point. This tells you how many months it takes for your monthly savings to cover your closing costs.

Using our example:

• Monthly savings: $120

• Closing costs: $21,600

• Break-even point: 180 months (15 years)

If you plan to stay in your home longer than 15 years, refinancing makes financial sense even with high closing costs. If you are planning to move in 5 years, the math changes dramatically.

This is why I always ask clients about their long-term plans before discussing refinance options. Your timeline matters as much as the interest rate.

What About Using Refinancing to Consolidate Debt?

Many homeowners consider cash-out refinancing to pay off high-interest credit card debt or other loans. The logic seems sound: trade 20% credit card interest for 6.5% mortgage interest.

But this strategy requires careful consideration.

When you roll consumer debt into your mortgage, you are converting unsecured debt into secured debt backed by your home. You are also potentially extending the repayment timeline. A credit card balance you might have paid off in 3 years could now be spread across 30 years of mortgage payments.

The math can still work in your favor, but only if you commit to not accumulating new debt and if the total interest savings justify the risk. This is not a decision to make based on a quick online calculator.

Questions to Ask Before Refinancing

Before you commit to any refinance, make sure you have clear answers to these questions:

1. What is my current interest rate versus the rate I qualify for today?

2. What are the total closing costs, and can any be waived or reduced?

3. How long do I plan to stay in this home?

4. What is my break-even point?

5. Am I extending my loan term, and if so, how does that affect total interest paid?

6. If consolidating debt, what is my plan to avoid accumulating new debt?

A lender who cannot or will not answer these questions clearly is not someone you want handling your refinance.

Why Timing Matters Less Than You Think

I hear this concern constantly: "Should I wait for rates to drop further?"

Here is the reality. No one can predict interest rates with certainty. Experts projected rates would hover just below 6% through 2026, but markets shift. Waiting for the perfect rate often means missing opportunities that exist right now.

If the math works today, it works today. You can always refinance again if rates drop significantly. But you cannot recover the months of savings you missed while waiting for a better deal that may never come.

The Bottom Line

Refinancing is not a one-size-fits-all decision. It requires understanding your complete financial picture, your long-term plans, and the true cost of the transaction. The lenders who show you only the monthly payment difference are not giving you the full story.

You deserve better than a sales pitch. You deserve a clear explanation of how refinancing affects your finances over the next 10, 20, or 30 years.

If you are a Michigan homeowner wondering whether refinancing makes sense for your situation, I am happy to walk through the numbers with you. No pressure, no obligation. Just honest math and straightforward advice.

Schedule a free refinance review with Michigan Mortgage Solutions by visiting michiganmortgagesolutions.com/refinance-consultation or calling (248) 963-1894. We will look at your specific situation and help you make a confident decision based on complete information, not just the numbers that look good on a flyer.