What is a refinance?+
A mortgage refinance replaces your existing home loan with a new one — typically to get a lower interest rate, reduce your monthly payment, change your loan term, or access home equity. You pay off your old mortgage and begin making payments on the new loan.
When should I refinance?+
Refinancing generally makes sense when: (1) you can lower your rate by at least 0.5%–1%, (2) you plan to stay in the home long enough to recoup closing costs (the break-even point), and (3) your credit score and equity qualify you for a better rate than you currently have. Use our break-even calculator to check your specific numbers.
What is the break-even point for refinancing?+
The break-even point is how long it takes to recoup your refinancing closing costs through monthly savings. Calculate it by dividing total closing costs by your monthly payment reduction. For example: $5,000 closing costs ÷ $200/month savings = 25 months. If you plan to stay in the home past 25 months, refinancing saves money.
What is a cash-out refinance?+
A cash-out refinance lets you borrow more than your current loan balance and receive the difference in cash. For example, if your home is worth $400,000 and you owe $200,000, you might refinance for $280,000 and receive $80,000 cash — useful for home improvements, debt consolidation, or major expenses. Cash-out rates are typically 0.125%–0.5% higher than rate-and-term rates.
How much does it cost to refinance?+
Refinance closing costs typically run 2%–5% of your loan amount, or $4,000–$10,000 on a $200,000 loan. Common costs include loan origination fees (0.5%–1%), home appraisal ($300–$700), title search and insurance ($1,000–$2,000), and prepaid property taxes and insurance. Some lenders offer "no-closing-cost" refinances that roll costs into a higher rate.
What is a rate-and-term refinance?+
A rate-and-term refinance changes your interest rate, your loan term (e.g., 30 years to 15 years), or both — without taking any cash out. It's the most common type of refinance, used primarily to lower monthly payments or pay off the mortgage faster. Because no cash is extracted, rates are generally lower than cash-out refinances.
Will refinancing hurt my credit score?+
Refinancing causes a small, temporary dip in your credit score — typically 5–10 points from the hard inquiry. Rate shopping with multiple lenders within a 14–45 day window counts as a single inquiry under FICO scoring models. The long-term credit impact of lower debt balances and on-time payments is positive.
How long does refinancing take?+
Most refinances close in 30–45 days from application. Simple rate-and-term refinances with strong credit can sometimes close in 3–4 weeks. FHA streamline and VA IRRRL refinances are designed to be faster, sometimes closing in 2–3 weeks. Delays often come from appraisals, title searches, and document verification.
What documents do I need to refinance?+
Typical refinance documents include: last 2 months of pay stubs, last 2 years of W-2s or tax returns (self-employed borrowers may need business returns too), last 2–3 months of bank statements, your current mortgage statement, a government-issued ID, and proof of homeowners insurance. Your lender will provide a full list specific to your situation.
How much equity do I need to refinance?+
For a conventional rate-and-term refinance, most lenders require at least 5%–20% equity (80%–95% LTV). To avoid private mortgage insurance (PMI), you typically need 20% equity. For cash-out refinancing, lenders usually limit borrowing to 80% of your home's value, so you'll need at least 20% equity remaining after the cash-out. FHA and VA loans have different, often more flexible, equity requirements.