Rate cycles do not just change mortgage math. They also change how much interest rate risk your whole household carries across a mortgage, cash, bonds, and employer stock exposure. The goal is simple. Make a clean refinance decision, set fixed vs variable exposures on purpose, and keep duration risk at a level that lets you sleep.
The Regime Shift Filter For Household Money
Your Refi And Exposure Checklist In Plain English
Use this one minute scan before you call a lender.
- Mortgage status, rate, and reset risk if any adjustable term exists
- Time in home you realistically expect to stay, not the ideal
- After tax breakeven months for a refinance, including all fees
- Non mortgage debt and whether it should be rolled, paid, or left alone
- Portfolio duration and cash buffer so total interest rate risk is balanced
A Decision Tree You Can Run In Five Clicks
Start at the top and stop when you hit an answer that fits.
- Do you hold an adjustable or interest only mortgage that resets within 24 months
- Yes. Price a fixed option now. If the payment increase at reset is above 10 percent of take home pay, prioritize a refi quote.
- No. Go to step 2.
- Will you stay in the home at least as long as the breakeven months on the new loan
- No. Keep the current loan. Revisit at next major rate move.
- Yes. Go to step 3.
- Does the new fixed rate cut the payment or de risk cash flow enough to matter
- If the principal and interest drop is at least 8 to 12 percent or removes reset risk, request full quotes.
- If the drop is trivial, stay put unless you are consolidating higher rate debt.
- Do closing costs plus points recover within your stay horizon
- If breakeven is longer than you will stay, do not refinance.
- If breakeven is shorter, proceed to documentation.
- After the refi, will your household be over concentrated in long duration assets
- If yes, shorten bond duration or raise cash to offset.
- If no, lock and move on.
When you have the quotes, model both paths in Nauma to compare payment, breakeven months, and how fixed vs variable mortgage choices change your overall duration risk.
What Fixed Vs Variable Should Mean For A Tech Household
Think across the whole balance sheet, not just the loan.
- Fixed mortgages reduce income volatility and let you take investment risk elsewhere. Good fit when equity compensation or job risk is high.
- ARMs can fit short stays or when the fixed rate premium is large. Only if you can absorb a reset without changing your savings rate.
- Debt strategy should not raise concentration. Do not pledge employer stock or expand margin risk to chase a lower rate.
- Duration risk is the sensitivity of your plan to rate moves. Count mortgage term, bond funds, and even cash ladders. Reduce duration elsewhere if you lock a long fixed loan.
A Worked Breakeven That Shows The Hinge Points
Illustrative Bay Area homeowner. Adjust to your quotes.
Item
Current
Refi offer
Rate and type
6.9 percent 30 year fixed
5.9 percent 30 year fixed
Loan balance
$1,000,000
$1,000,000
Principal and interest
$6,594 per month
$5,919 per month
Monthly change
–
$675 lower
Closing costs and points
–
$12,000
Breakeven months = $12,000 divided by $675 which is about 18 months.
If you plan to stay at least 4 years, the payment reduction is material and the breakeven clears. If you expect to move in 12 to 18 months, skip the refi and redirect effort to sale prep.
How To Place Debt Inside A Broader Household Strategy
- Keep a 6 to 12 month cash buffer outside investments so rising rates do not force asset sales
- If you lock a 30 year fixed, consider shorter duration bond funds to keep total duration balanced
- If you keep an ARM, pre plan the reset payment and fund a side account that covers the higher payment for at least 12 months
- Do not consolidate unsecured debt into the mortgage unless behavior and payoff plan are fixed
Mistakes That Create Avoidable Pain
- Refinancing when breakeven exceeds your realistic stay in the home
- Extending term to lower payment without a prepayment schedule
- Ignoring total duration risk after adding a long fixed loan
- Swapping into variable debt elsewhere to justify a fixed mortgage
- Treating lower payment as extra lifestyle rather than restoring savings rate
Quick Answers Before You Sign
What is a reasonable breakeven target on a refinance
Many aim for breakeven within 18 to 30 months. Shorter is better if your stay horizon is uncertain.
Should I choose points to buy down the rate
Only if the point cost repays within your expected stay. Compare zero point vs one point breakeven.
How do rising rates change my portfolio
If you lock a long fixed mortgage, consider shortening bond duration and keep enough cash to avoid selling assets in a drawdown.
Is an ARM ever smart in a rising rate regime
It can work for short stays or if the fixed rate premium is very high. Only if your plan funds a potential reset without cutting your savings rate.
Should I roll high rate credit cards into the refi
Consider it only with a firm payoff schedule and spending controls. Otherwise the balance can quietly grow inside a 30 year loan.
