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When to Refinance a Mortgage: Is Now a Good Time?

If you can shave at least 0.75% off your interest rate and plan to stay in your home for the long haul, consider refinancing your mortgage.

By Kim Porter

Written by

Kim Porter


Kim Porter is an expert in credit, mortgages, student loans, and debt management. She has been featured in U.S. News & World Report,, Bankrate, Credit Karma, and more.

Edited by Reina Marszalek

Written by

Reina Marszalek

Senior editor

Reina is a senior mortgage editor at Credible and Fox Money.

Updated April 23, 2024

Editorial disclosure: Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”


Once mortgage rates start dropping, homeowners are often tempted to refinance their home loans.

Refinancing replaces your current mortgage with a new loan and new terms. But it’s not the right choice for everyone, even if you qualify for a lower interest rate. You’ll also want to consider how long you’ll be in the home and how long it takes to recoup expenses.

Is now a good time to refinance?

Generally, a mortgage refinance is a good idea if it will save you money. Mortgage experts say you should consider this move if you can lower your interest rate by at least 0.75%.

For example: Let’s say you have a 30-year, $300,000 loan with a 4% fixed mortgage rate and a monthly payment of $1,567. Refinancing to a new 30-year loan with a 3.25% interest rate can lower your payment by $134, which adds up to $48,240 over the life of the loan.

And if you’ve paid off some of your principal since taking out the original mortgage, your new loan will be based on a lower balance. That can further lower your monthly payment and save you more money.

Use our mortgage refinance calculator to help you decide if you should refinance.

How much does it cost to refinance?

Even if you qualify for a lower interest rate, you’ll need to consider the costs of refinancing your mortgage to determine if it’s worth it.

Closing costs typically amount to 2% to 5% of the principal amount of the loan. So if you borrow $300,000 and closing costs are 2%, then you would owe $6,000 at closing.

Other factors, such as where you live, influence the price tag. Here are some of the common costs that come with refinancing:

Estimated cost
Loan origination fee
0.5% to 1.5% of the loan amount
Appraisal fee
$300 to $500
Title insurance fee
Credit report fee
$30 to $50
Prepaid interest charges
Depends on your interest rate and when your loan closes
Recording fee
Mortgage points
Depends on how many points you pay for (1% of your mortgage loan amount equals 1 point)

Some lenders may offer you a no-cost refinance, which means you won’t pay closing costs upfront. But they’ll make up for this by either wrapping the closing costs into the mortgage principal or increasing your interest rate. You might still come out ahead, but compare the interest costs on your original loan and the new loan to be sure.

How to know when you’ll break even

To figure out how long it will take to recoup your refinance expenses, divide the amount of your closing costs by the amount you save each month. This is called the “break-even point” of a mortgage refinance.

For instance, it would take about 35 months to break even on $5,000 in closing costs if your monthly payment drops by $143. But if you sell the house before the break-even point, you’ll lose money in the deal. If you know you’ll move soon, then refinancing might not be worth it.

How long does it take to refinance?

A mortgage refinance typically takes 30 to 45 days to complete, but it may take longer if your lender is dealing with high loan demand or something else slows down the deal. One way to prevent losing out on a good mortgage rate is to lock in your rate for a given period, around 30 to 60 days.

Refinancing through Credible will streamline the application process so you can save time and potentially get to the closing table faster. Use the form below to get started.

Find our if refinancing is right for you

Find My Refi Rate

Checking rates won’t affect your credit score

Why should you refinance?

By refinancing, you may be able to lower your monthly mortgage payments, save on interest, get a shorter loan term, or take out cash — but you generally can’t do it all at once. You’ll need to figure out your main goals before applying.

To save on interest

If you qualify for a lower interest rate, you can save on interest costs while also lowering your monthly payment. To see if you come out ahead, figure out the interest costs on your current loan and the new mortgage.

For example: Say you took out a 30-year, $300,000 mortgage with a fixed interest rate of 4% and a 20% down payment. If you paid down the loan over 30 years, interest would add up to $172,753. But one year into the loan, you swap out your mortgage for a new 30-year loan with a 3% interest rate.

In this example, a refinance lowers your monthly payments by $151 and saves you $41,132 in interest over the life of the loan.

Find Out: Is It Worth Refinancing a Mortgage for 0.5% Off?

To pay off your loan sooner

If getting out of debt ASAP is important to you, then refinancing into a shorter-term loan can help. While your monthly payments will likely climb because you’re paying off debt within a shorter time frame, you could save a lot on interest costs.

Take a look at the original mortgage from the example above. If you refinance from a 30-year loan with a 4% rate into a 15-year mortgage with a 3% rate, you’ll take on a higher monthly payment, but you’ll also pay off your mortgage 14 years sooner. In the process, you save $105,911 in interest compared to your original loan.

To change to a different loan type

Homeowners can also refinance from an adjustable-rate mortgage (ARM) to a fixed-rate loan — or vice versa.

What you should know: ARMs start with a low interest rate for a specified period; then, the rate can go up or down for the remainder of the loan term. That may result in a higher interest rate, which drives up your monthly payments. By refinancing to a fixed-rate loan, you don’t have to worry about future interest rate hikes.

Conversely, shifting from a fixed-rate loan to an ARM can be a good financial strategy if interest rates are falling and you don’t plan to stay in your home for long.

Learn more: 5/1 ARM: Your Guide to 5-Year Adjustable-Rate Mortgages

To tap into home equity

Tapping into your home equity through a cash-out refinance is another reason to refinance. This involves getting a new mortgage for more than your current balance and pocketing the difference.

You’ll pay off a larger mortgage balance, but you can put the excess money toward higher-interest debt or home renovations.

If you’re considering a cash-out refinance, be sure to consider as many lenders as possible. Credible makes finding the best deal easy — you can compare multiple lenders and see prequalified rates in as little as three minutes.

Meet the expert:
Kim Porter

Kim Porter is an expert in credit, mortgages, student loans, and debt management. She has been featured in U.S. News & World Report,, Bankrate, Credit Karma, and more.