The rule of thumb for refinancing your mortgage takes the form of a question: if you were to refinance, would you be able to lower your interest rate by at least two percentage points (e.g., from 8% to 6%)? The problem with this is that it’s arbitrary and does not indicate the actual viability of refinancing your mortgage. There are actually two questions to ask: how long you plan to stay in your home, and when will you break even after refinancing. Make sure you are comfortable with how long it will take your personal savings to recover after refinancing.

What about borrowers who have extreme circumstances, like borrowers who are unemployed? Can they still refinance their mortgage? Unfortunately, the answer to this question is a definite ‘no’. With no job, lenders consider you untouchable, even with an excellent credit history. There is simply no way to negotiate a refinance when you are unemployed. Note that there are no laws expressly prohibiting lenders from negotiating with you, it is simply standard practice to avoid lending to unemployed borrowers. In the meantime, what you can do is research refinancing your mortgage so that when you are employed again, you are prepared to talk to lenders.