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When to refinance
Refinancing makes sense when your new rate is at least 0.5–1% lower and you plan to stay long enough to recoup closing costs.
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Closing costs
Expect to pay 2–5% of your loan amount in closing costs. On a $300,000 loan, that is $6,000–$15,000.
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Break-even point
The break-even point is when your monthly savings equal your closing costs. If you move before then, refinancing may not pay off.
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No-cost refinance
Some lenders offer no-closing-cost refinances. The costs are rolled into the loan or offset with a slightly higher rate.
Sources and further reading
For independent guidance on whether refinancing makes sense, these are good places to start:
Results are estimates for planning purposes and are not financial advice. Your lender or a qualified professional can provide figures specific to your situation.
Common mistakes people make when refinancing
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Skipping the break-even calculation. If you move before you hit break-even, the refinance can end up costing more than it saves.
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Resetting the clock back to 30 years. Refinancing into a new 30-year term after years of payments can lower your monthly payment but extend the total time — and total interest — it takes to be mortgage-free.
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Rolling closing costs in quietly. Closing costs (typically 2–5% of the loan) either come out of pocket or get added to the new balance. Rolling them in increases what you owe even if the payment looks similar.
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Chasing a marginal rate drop. A 0.25% rate cut rarely covers closing costs fast enough to be worth it. Most lenders look for at least a 0.5–1% improvement before it's clearly worthwhile.
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Not shopping more than one lender. Your current lender's refinance offer is rarely the best one available — rate and closing costs both vary meaningfully between lenders for the same loan.
A few things we learned the hard way
We refinanced more than once while raising four daughters, mostly to pull cash out for real expenses — braces, doctor's bills, the cost of raising kids. A couple of those refinances were clearly worth it, and the last one landed us an incredible 2.65% rate. Other times the rate was just okay. The lesson: even when you need the cash and know you're refinancing regardless, check where rates actually stand before you lock one in — don't assume your bank's offer is the best you'll get.
We weren't chasing savings or running break-even math — we needed the money for our family, and I know a lot of households are in that same spot right now. If that's you, the traditional "will refinancing save me money" framing doesn't really apply. The real question becomes which lender gives you the best rate and terms on the cash you need, so it's worth comparing offers even when refinancing itself isn't optional.
There's a lot of paperwork involved in refinancing, more than people expect. Use a lender you actually trust — verify who you're working with — and do your homework on rates before you sign anything. Don't let the stack of documents rush you into skipping that step.
Common questions
When should I refinance my mortgage?
Refinancing generally makes sense when you can lower your interest rate by at least 0.5% to 1%, when you plan to stay in your home long enough to recoup the closing costs, or when you want to switch from an adjustable-rate to a fixed-rate mortgage. Read the full Should I Refinance guide for a complete breakdown with real numbers.
What is a break-even point in refinancing?
The break-even point is how many months it takes for your monthly savings to equal the closing costs of the refinance. If your break-even is 24 months and you plan to stay in the home for 5 years, refinancing makes financial sense. See how much you can save refinancing for real examples.
How much does it cost to refinance a mortgage?
Refinancing typically costs 2% to 5% of the loan amount in closing costs. On a $300,000 loan, that is $6,000 to $15,000. Some lenders offer no-closing-cost refinances, but these usually come with a slightly higher interest rate.
Does refinancing hurt your credit score?
Refinancing causes a small, temporary dip in your credit score due to the hard inquiry from the lender. This typically recovers within a few months. Shopping multiple lenders within a short window (14–45 days) usually counts as a single inquiry.
What credit score do I need to refinance?
Most lenders require a minimum credit score of 620 for a conventional refinance. To qualify for the best rates, a score of 740 or higher is ideal. See What is a Good Refinance Rate? for a full breakdown by credit tier. FHA refinances may be available with scores as low as 580.
How long does a mortgage refinance take?
A mortgage refinance typically takes 30 to 45 days from application to closing. Some streamline refinance programs can close faster, in as little as 2 to 3 weeks. Use the mortgage calculator to model your new payment while you shop rates.
How soon can I refinance after buying a home?
Most conventional lenders don't require a waiting period to refinance, though some impose a 6-month seasoning requirement before a cash-out refinance. FHA and VA loans typically require at least six payments before you can refinance. Even without a required waiting period, refinancing too soon after closing rarely makes sense unless rates have dropped significantly, since you'd be paying a second round of closing costs so close to the first.
Is it worth refinancing to save $100 a month?
It depends on your closing costs and how long you'll stay in the home. If closing costs are $4,000 and you save $100 a month, your break-even point is 40 months, just over 3 years. If you plan to stay longer than that, refinancing is usually worth it; if you might move sooner, the savings may not outweigh the upfront cost. Run your own numbers with the calculator above to see your exact break-even point.
Should I refinance to lower my payment or to pay off my mortgage faster?
It depends on your goal. Refinancing into a lower rate at the same or longer term lowers your monthly payment but can extend how long you're in debt. Refinancing into a shorter term, like 15 years, usually raises your monthly payment but cuts your total interest and gets you debt-free sooner. If you can afford the higher payment, a shorter term saves more long-term; if cash flow is tight, a lower payment gives you more breathing room.