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    When to Refinance Your Mortgage

    Updated: April 28 2026 • 6 min read
    Written by Bennett Leckrone
    Bennett Leckrone

    Written by
    Bennett Leckrone
    Writer / Reviewer / Expert

    Bennett Leckrone is the editorial manager and an analyst for Lower. He specializes in making complicated mortgage topics accessible for consumers. That includes both in-depth product guides and analysis on what economic moves mean for homebuyers and refinancers. He is also a licensed loan officer in Ohio, NMLS ID 2782574. He was previously a business reporter with a focus on higher education and fintech at BestColleges. In that role, he reported on the development of fintech and AI curriculum, as well as the rapidly changing nature of finance education. He also wrote guides to help business students navigate AI and online education. He also reported on state politics at Maryland Matters, with a focus on how policy affected people and businesses. He holds a bachelor of science in journalism degree from Ohio University.
    Reviewed by Jake Driscoll
    Jake Driscoll

    Reviewed by
    Jake Driscoll
    Reviewer

    Jake Driscoll is an experienced loan advisor and trainer who specializes in simplifying the mortgage process for both homebuyers and loan officers. He’s an expert in all things mortgage and refinance, and currently serves as the Associate Vice President for Training and Development at Lower. In that role, he prepares aspiring loan officers for the NMLS SAFE Exam and serves as a mentor to loan officers across Lower. As an expert reviewer, Jake evaluates mortgage and personal finance content for accuracy, clarity, and real-world applicability. He specializes in ensuring information reflects how lending actually works in practice so consumers can make confident, informed decisions.
    Our Editorial Standards

    Key Takeaways

    • Refinancing can be a good option if you can land substantially lower rates or want to change your loan type or terms.
    • Break-even timing, or when you're able to recover the costs of refinancing, is another key part of the decision-making process.
    • That also means you’ll need to expect to keep your home long enough to break even on the refinance.
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    The right time to refinance your mortgage is when the math works and your personal timeline supports it.

    In most cases, that means three things:

    • you can meaningfully improve your loan terms

    • you can recover your closing costs within a reasonable period

    • you expect to keep the home long enough to benefit from the change

    The right time to refinance depends on your unique financial situation, as well as the market and the program you’re pursuing.

    Common Refinance Types

    Refinance Type

    Best For

    Key Features

    Typical Considerations

    Rate-And-Term

    Lowering payment or changing term

    New rate, new term, no meaningful cash out

    Standard underwriting, closing costs

    Cash-Out

    Accessing equity

    New loan exceeds current balance and pays out cash

    Usually stricter requirements

    Streamline Refinance

    Eligible FHA or VA borrowers seeking a simpler path

    May reduce documentation and appraisal needs

    Must meet program rules

     

    When Refinancing Makes Sense

    Refinancing usually makes sense when the financial benefit is large enough to justify the upfront cost.

    The strongest reasons include:

    A lot of homeowners still use a rough screening rule of a 0.5 to 0.75 percentage point rate drop.

    That can be useful, but it is not the real decision rule. The better test is whether the total savings outweigh the refinance costs during the time you expect to keep the loan.

    Refinance Break-even Calculator

    Refinance rates aren’t the only thing to look at when timing a refinance. You need to weight the total costs of a refinance with break-even timing, which tells you how long it takes for your monthly savings to recover your refinance costs.

    If you expect to sell or refinance again before that point, refinancing may not be worth it.

    You can use our break-even calculator to get an idea of what that might look like in different scenarios for you.

    Refinance Break-Even
    Calculator

    See how long it takes for monthly P&I savings to recover your closing costs — and whether resetting your term makes the numbers better or worse.

    Estimated Break-Even Point

    —

    What's driving this estimateLive from your current assumptions
    Use the sliders for quick comparisons or tap the blue value pills to type exact numbers.
    New Loan Term

    Break-even estimate only. Does not include taxes, insurance, escrow changes, or prepaid items. Not a loan offer.

    How this calculator works

    Move the sliders to test scenarios, or tap any blue value pill to type an exact number. The headline result and supporting detail pills update live as you change inputs.

    Methodology: New monthly P&I is amortized at the new rate over the selected term using M = P · r(1+r)n / ((1+r)n−1). Monthly savings = current P&I − new P&I. Break-even = closing costs ÷ monthly savings. The calculator also compares total interest remaining on the current loan versus the new loan, surfacing the hidden cost of term extension.

    Worked example: Current balance $300,000, 25 yrs remaining, current P&I $2,100, new rate 5.75%, 30-yr, $6,000 closing costs: new P&I ≈ $1,751/mo; monthly savings = $349/mo; break-even ≈ 17 months. Resetting to 30 yrs adds 5 yrs of payments and increases lifetime interest significantly.

    Use these estimates to compare options and prepare questions for a lender. Final pricing, eligibility, and approval depend on a full application and lender review.

    Explore your options in 3 minutes.

    Signs It May Be The Right Time To Refinance

    Your Rate Is Meaningfully Higher Than Current Market Rates

    If your current mortgage rate is well above what you can get today, refinancing may lower your payment or reduce total interest.

    Your Credit Has Improved

    A stronger credit profile can help you qualify for better pricing than when you first took out the loan.

    You Have More Equity

    Higher equity can improve your options, lower pricing adjustments, and in some cases help remove PMI.

    You Want More Payment Stability

    Borrowers with adjustable-rate mortgages often refinance into fixed-rate loans when they want steadier payments.

    You Want To Change Your Payoff Timeline

    Moving from a 30-year mortgage to a 15- or 20-year loan can reduce total interest substantially, even if the monthly payment rises.

    Costs And Requirements To Consider

    Refinancing is not free. Costs often include lender fees, title charges, taxes where applicable, and sometimes appraisal fees.

    The CFPB recommends comparing official Loan Estimates from multiple lenders so you can see the full cost of the refinance side by side.

    Key qualification factors usually include your credit score, debt-to-income ratio, loan-to-value ratio, income and employment, and property value.

    Some refinances require an appraisal, but some conventional loans may qualify for value acceptance or appraisal waivers depending on automated underwriting findings and property eligibility.

    Market Timing And Rate Chasing

    Trying to perfectly time the mortgage market is difficult. A better approach is to ask whether today’s offer improves your situation enough to justify the costs.

    Freddie Mac’s survey is useful for market context, but your actual rate will depend on your credit, equity, loan type, and lender pricing.

    Refinance when the numbers work for you. Do not wait indefinitely for a slightly lower headline rate if you already clear your break-even threshold.

    Alternatives To Refinancing

    If refinancing does not clear your break-even test, other options may help.

    Mortgage Recast

    A recast lowers the monthly payment after a large principal payment without replacing the mortgage. It does not usually change the interest rate.

    Extra Principal Payments

    Paying extra toward principal can reduce total interest without refinancing costs.

    PMI Removal

    If you now have enough equity, you may be able to remove PMI without refinancing, depending on your loan type and lender rules.

    Home Equity Loan Or HELOC

    If your real goal is accessing cash rather than improving the first mortgage itself, a second-lien option may make more sense than a full refinance.

    The Bottom Line

    The right time to refinance your mortgage ultimately comes down to your personal situation. If you can substantially lower your rate or get better terms, and the break-even timing works for you, it might be a good time to refinance.

    Frequently Asked Questions

    How Much Lower Should My Rate Be Before I Refinance?

    Many homeowners start considering refinancing when the new rate is about 0.5 to 0.75 percentage points lower, but the real test is whether the savings justify the closing costs within your expected time in the home.

    Does Refinancing Make Sense If I Plan To Sell Soon?

    Usually not, unless you can recover the closing costs before you sell.

    Will Refinancing Always Lower My Monthly Payment?

    No. Payments may rise if you choose a shorter term or different loan structure.

    Do I Need An Appraisal To Refinance?

    Often yes, but some conventional files may qualify for value acceptance or appraisal waivers depending on underwriting.

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