What the ratio fails to factor in is the key question of how long you are going to stay. We took a gamble on a refi in 2012 and lost about $5K in equity. But we got a five year shorter term, a 5% shorter monthly payment and an interest rate that dived from 5.875% to 2.75%. So my equity right now is about where it was when we did the refi.
It made sense only because we planned to stay.
And, I’ll add, we are in one of the most stable real estate markets in the country. Annual changes of more that 4% or so are extremely rare (either up our down).