Most people decide whether to refinance by looking at the rate gap. But the first question on the US Consumer Financial Protection Bureau's “Should I refinance?” handout is not about rates at all.
“Are you planning to move soon?”
“Has the value of your home fallen?” · “Has your credit standing declined?” · “Does your mortgage have a prepayment penalty?”
— Consumer Financial Protection Bureau, “Should I refinance?” handout (September 2020)
1. How long to break even. On a ₩200 million balance with 15 years left, moving from 5.0% to 3.5% saves ₩151,822 a month — so costs of ₩1M take 6.6 months, ₩2M take 13.2, ₩3M take 19.8 to recover (our calculation).
2. Where the risk is. “No-cost refinancing” does not mean the cost went away. The CFPB names both mechanisms: a higher rate offset by a credit, or the costs rolled into the principal. The first costs more the longer you hold it; the second raises the payment and reduces your equity.
3. What to look at first. The CFPB's opening question is not the rate but “are you planning to move soon?” — the cost goes out all at once now while the saving arrives a little each month, so leave early and it never gets recovered.
We calculated the payback period
The CFPB handout poses the questions but gives no break-even formula. So we ran it: a 200-million-won balance, 15 years remaining, equal monthly principal-and-interest, with the cost of moving divided by the monthly saving.
| Rate change | Monthly saving | Cost 0.5% (1m won) | Cost 1.0% (2m won) | Cost 1.5% (3m won) |
|---|---|---|---|---|
| 5.0% → 3.5% | 151,822 won | 6.6 months | 13.2 months | 19.8 months |
| 5.0% → 4.0% | 102,211 won | 9.8 months | 19.6 months | 29.4 months |
| 5.0% → 4.5% | 51,601 won | 19.4 months | 38.8 months | 58.1 months |
| 4.5% → 4.0% | 50,611 won | 19.8 months | 39.5 months | 59.3 months |
Which is exactly why CFPB's first question is “are you planning to move soon?” If the payback is 39 months and you sell in two years, refinancing left you worse off. The order is: rate gap → payback period → how long will I actually hold this loan.
“No-cost” refinancing does not remove the cost
An offer to refinance with no fees is tempting. CFPB is direct about it.
“There are services rendered and costs related to originate all mortgages.”
Two ways the fees are made to disappear — ① charging a higher interest rate and giving a credit against origination costs, ② rolling closing costs into the loan balance.
“A higher interest rate will mean you pay more over time and a higher loan amount will increase your payments and reduce your equity.”
— Consumer Financial Protection Bureau, “Is there such a thing as a no-cost or no-closing cost loan or refinancing?” (April 26, 2024)
The cost does not vanish — it moves into the rate or the principal. So when you see “zero fees,” check whether the rate is higher than everyone else's. In the payback table above, a cost shifted into the rate shows up as a smaller monthly saving rather than a smaller upfront bill.
Stretching the term lowers the payment, but
“That could mean a lower monthly payment, but paying more money in total.”
And rather than accepting a standard duration, the guide suggests discussing custom terms with your lender.
— Consumer Financial Protection Bureau, “Should I refinance?” handout (September 2020)
| Remaining term | Monthly payment (200m won, 4.0%) | Total interest |
|---|---|---|
| 10 years | 2,024,900 won | 43.0m won |
| 15 years | 1,479,380 won | 66.3m won |
| 20 years | 1,211,960 won | 90.9m won |
| 30 years | 954,830 won | 143.7m won |
Same 200 million won, same 4.0%: stretching from 15 years to 30 cuts the monthly payment by 520,000 won and adds 77.5 million won of total interest. The extra paid for the longer term can easily exceed what the lower rate saved. (Our calculation, equal principal-and-interest.)
Refinancing often comes with resetting the remaining term back out. The monthly burden drops sharply, so it feels like “lower rate and lower payment” — but total interest can rise. Compare terms and repayment methods directly in the loan interest calculator.
The order to check
| Step | What to check | Basis |
|---|---|---|
| ① How long will you hold it | “Are you planning to move soon?” | CFPB text |
| ② Prepayment penalty | “Does your mortgage have a prepayment penalty?” | CFPB text |
| ③ Credit and collateral | “Has your credit standing declined?” · “Has the value of your home fallen?” | CFPB text |
| ④ Compute the payback | Cost ÷ monthly saving = months. Must be shorter than ① | Our calculation |
| ⑤ Compare totals too | A longer term lowers the payment but can raise total interest | CFPB text |
| ⑥ “No-cost” offers | Check whether the cost moved into the rate or the principal | CFPB text |
Actual penalty rates and how they are computed are in the prepayment fee guide, with your own numbers in the calculator. If a lump sum has you weighing “refinance or repay,” start with paying down versus saving.
Questions this raises
How many points lower makes it worth it?
There is no fixed answer. As the table shows, the same 0.5pp takes 19 months at a 1-million-won cost and 58 months at 3 million. The test is not the rate gap but whether the payback is shorter than your holding period.
Is refinancing pointless on a small balance?
A smaller balance means a smaller monthly saving, though percentage-based fees shrink with it. What hurts is flat costs like registration and stamp duty — those weigh more heavily on a small balance.
What if only a few years remain?
Same logic. A short remaining term means there is less interest left to save in the first place. The table above assumes 15 years remaining.
What about switching to a variable rate?
The CFPB material we opened does not address fixed-versus-variable. Note though that the payback calculation assumes the rate holds — with a variable rate, that assumption itself is in play.
The first refinancing question is not the rate gap but how long you will hold the loan. The cost leaves all at once; the saving arrives monthly. Halve the rate gap and the payback period doubles.
Sources
- Consumer Financial Protection Bureau — “Should I refinance?” handout (September 2020). Source for the four questions — “Are you planning to move soon?”, “Has the value of your home fallen?”, “Has your credit standing declined?”, “Does your mortgage have a prepayment penalty?” — plus “a lower monthly payment, but paying more money in total” and the advice to discuss custom terms. The document contains no break-even formula.
- Consumer Financial Protection Bureau — “Is there such a thing as a no-cost or no-closing cost loan or refinancing?” (April 26, 2024). Source for “services rendered and costs related to originate all mortgages,” the two mechanisms (higher rate with credit, or rolling costs into the balance), and “a higher interest rate will mean you pay more over time and a higher loan amount will increase your payments and reduce your equity.”
Where to check further
- The break-even for your own numbers. The table assumes a ₩200M balance, 15 years remaining, equal instalments and a held rate, and is our own calculation — the CFPB handout gives no formula. Run your balance and remaining term through the loan calculator first.
- The real prepayment rate and the incidental costs. The 0.5 / 1.0 / 1.5% in the table are illustrative, and registration, stamp duty and appraisal are not included — so real break-even runs longer than shown. Your rate is in your loan agreement; the incidentals come from the bank you would move to.
- Current market rates and the switching process in Korea. Not confirmed against agency sources here. Korea's refinancing platform compares several lenders at once, and average bank lending rates are published in the Bank of Korea's ECOS statistics.
Written as of July 2026. The question list and the “no-cost” mechanics come from CFPB source text; the payback table is our own calculation under the stated assumptions. For whether to repay a lump sum instead, see paying down versus saving; for penalty detail, the prepayment fee guide. This is general information, not financial advice.
