How to Refinance Your Mortgage: When It Makes Sense (2026)
March 2026 · 8 min read
Quick Answer
Refinancing makes sense when you can lower your rate by at least 0.75–1% and plan to stay in the home long enough to recoup closing costs. The break-even point is typically 18–36 months.
How to Calculate Your Refinance Break-Even Point
The break-even point tells you how long you must stay to make refinancing worthwhile.
| Scenario | Numbers |
|---|---|
| Current Rate | 7.5% |
| New Rate | 6.5% |
| Loan Balance | $280,000 |
| Monthly Savings | $186/month |
| Closing Costs | $8,000 |
| Break-Even Point | $8,000 / $186 = 43 months (3.6 years) |
| Decision | Refinance if staying 4+ years |
Step-by-Step Mortgage Refinance Guide
- →Check your credit score — lenders want 620+ for conventional, 740+ for best rates
- →Calculate your break-even point before applying
- →Get quotes from at least 3 lenders — rates vary significantly
- →Compare APR not just interest rate — APR includes fees
- →Lock your rate once you find the best offer
- →Gather documents — pay stubs, W-2s, bank statements and tax returns
- →Complete the appraisal and underwriting process
- →Review closing disclosure carefully before signing
- →Close and start saving money every month
Calculate Your New Mortgage Payment
Use our free mortgage calculator to see your new payment at current rates.
Try the Mortgage Calculator →Frequently Asked Questions
When should I refinance my mortgage?
Consider refinancing when rates drop at least 0.75-1% below your current rate, when you plan to stay long enough to recoup closing costs, or when you want to switch from an ARM to fixed rate.
How much does it cost to refinance?
Refinancing costs 2-5% of the loan amount in closing costs. On a $300,000 mortgage expect $6,000-15,000 in costs. Some lenders offer no-closing-cost refinances but at a slightly higher rate.
What is a cash-out refinance?
A cash-out refinance replaces your mortgage with a larger loan and you receive the difference in cash. It lets you access home equity but increases your loan balance and monthly payment.
How long does refinancing take?
A typical refinance takes 30-45 days from application to closing. During this period you will need to provide income documentation, get an appraisal and wait for underwriting approval.
Does refinancing hurt your credit score?
Refinancing causes a small temporary dip of 5-10 points from the hard credit inquiry. This typically recovers within 6-12 months. Rate shopping within 45 days counts as one inquiry.