Current Mortgage
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yrs
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Optional — we'll calculate if blank
New Loan Terms
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yrs
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Typically 2–5% of loan balance
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Extra cash drawn from equity (optional)
Monthly Savings
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New Payment
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Break-Even
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months to recoup costs
Lifetime Savings
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total interest saved
Refinance Comparison
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When Does Refinancing Make Sense?
Refinancing replaces your existing mortgage with a new loan — typically to secure a lower interest rate, reduce monthly payments, shorten the loan term, or access home equity. The classic rule of thumb is to refinance when you can lower your rate by at least 0.75% to 1%, but your break-even point matters most.
💡 Break-even rule: Divide your total closing costs by your monthly savings. If you'll stay in the home longer than the break-even period (in months), refinancing likely makes financial sense.
Reasons to Refinance
- Rate-and-term refinance: Lower your rate or change your loan term without taking cash out
- Cash-out refinance: Borrow more than you owe and receive the difference in cash for renovations, debt consolidation, or other goals
- Shorten loan term: Switch from a 30-year to a 15-year mortgage to save significantly on interest over the life of the loan
- Remove PMI: If your home has appreciated, refinancing may eliminate private mortgage insurance
- Switch loan type: Move from an adjustable-rate mortgage (ARM) to a fixed-rate loan for payment stability
2025 Refinance Rate Benchmarks
| Loan Type | Avg Rate (2025) | Best Use Case |
|---|---|---|
| 30-Year Fixed | 6.50–7.25% | Lowest monthly payment, long-term stability |
| 15-Year Fixed | 5.75–6.50% | Pay off faster, save on total interest |
| 20-Year Fixed | 6.00–6.75% | Balance between 15 and 30 year |
| 5/1 ARM | 5.50–6.25% | Short-term ownership, lower initial rate |
Frequently Asked Questions
How much does refinancing cost?
Refinancing closing costs typically run 2–5% of the loan balance. On a $250,000 loan, expect $5,000–$12,500 in closing costs. These include origination fees (0.5–1%), appraisal ($300–$700), title insurance, and government recording fees. Some lenders offer "no-closing-cost" refinances that roll fees into the rate or loan balance — convenient but more expensive long-term.
What credit score do I need to refinance?
Most conventional refinances require a minimum 620 credit score, but you'll need 740+ to qualify for the best rates. FHA refinances allow scores as low as 580. Your credit score is the single biggest factor in the rate you're offered — a 760 score vs 680 can mean 0.5–1% difference in rate, which adds up to tens of thousands of dollars over a 30-year loan.
How long does a refinance take?
A typical refinance takes 30–45 days from application to closing. Streamline refinances (FHA or VA) can close in as little as 2–3 weeks. The timeline depends on your lender's workload, how quickly you provide documents, and whether an appraisal is required. Getting all your documents ready upfront — W-2s, pay stubs, bank statements, and tax returns — speeds up the process significantly.
Does refinancing hurt your credit score?
Refinancing causes a small, temporary credit score dip. The lender's hard inquiry typically drops your score 5–10 points for a few months. However, if you shop multiple lenders within a 14–45 day window, credit bureaus treat all mortgage inquiries as a single inquiry. The long-term impact is usually neutral or positive once payments resume, since the new loan resets your payment history.
Should I pay points to get a lower rate?
One mortgage point costs 1% of the loan amount and typically reduces your rate by 0.25%. Whether buying points makes sense depends on your break-even calculation. If paying $2,500 for one point saves $50/month, you break even in 50 months (~4 years). If you plan to stay longer, points are worth it. If you might sell or refinance again sooner, skip the points and keep the cash.
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