Is It Worth Refinancing? A Complete Guide

Updated April 2026 · Current 30-yr rate: 6.870% (as of 2026-04-28)

Quick Decision Checklist

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My new rate would be at least 0.5% lower

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I plan to stay in my home past the break-even point

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My credit score is 620+ (740+ for best rates)

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I have at least 20% equity (or FHA/VA loan)

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I'm planning to sell within 12 months

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My break-even is longer than 10 years

Green = reasons to refi · Red = reasons to wait

The Break-Even Rule

The most important factor in a refinancing decision is the break-even point: how long it takes to recoup your closing costs through monthly savings.

Break-even months = Closing Costs ÷ Monthly Savings

Example: $6,000 closing costs ÷ $250/month savings = 24 months

If you plan to stay in your home longer than the break-even period, refinancing saves money. If you might move sooner, it may not be worth the upfront cost.

When Rates Favor Refinancing

The current 30-year refi rate is 6.870%. You should consider refinancing if:

  • Your current rate is 7.37% or higher (0.5% rate reduction threshold)
  • You have an adjustable-rate mortgage and want payment certainty
  • You want to switch from a 30-year to a 15-year loan
  • You need cash for home improvements and have 20%+ equity
  • You want to remove a co-borrower (e.g., after divorce)

Types of Refinancing

Rate-and-Term

6.870%

Lower your rate or change your loan term without taking cash out. Most common.

Cash-Out Refi

7.120%

Borrow more than you owe and take the difference as cash.

FHA Streamline

6.620%

Fast refi for existing FHA borrowers, minimal paperwork.

VA IRRRL

6.370%

Lowest rates for eligible veterans with existing VA loans.

Common Refi Mistakes to Avoid

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    Ignoring closing costs

    Always calculate the full break-even, including all fees.

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    Only shopping one lender

    Get quotes from 3-5 lenders — rates can vary by 0.5%+.

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    Extending your loan term unnecessarily

    If you're 10 years into a 30-year loan, consider a 20-year refi to avoid restarting the clock.

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    Not locking your rate

    Once you find a good rate, lock it in immediately — rates change daily.

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    Making major credit changes during the process

    Avoid new accounts, large purchases, or job changes during your refi application.

Frequently Asked Questions

How much should my rate drop to make refinancing worth it?+
The traditional rule of thumb is a 1% rate drop, but with today's higher loan balances, even a 0.5% reduction can save thousands. Use our break-even calculator to find the exact threshold for your situation.
Should I refinance if I plan to move in 3 years?+
Only if your break-even point is under 3 years. For example, if you save $200/month and closing costs are $4,000, you break even in 20 months — refinancing would be worth it for a 3-year stay.
Can I refinance with bad credit?+
FHA streamline and VA IRRRL refinances have lower credit requirements (580+). If you already have an FHA or VA loan, you may qualify even with imperfect credit. Conventional refi typically requires 620+.
Does refinancing hurt my credit score?+
Yes, briefly. A hard inquiry typically drops your score 5-10 points. However, rate shopping within a 45-day window counts as a single inquiry. The long-term impact of lower debt is positive.
Can I roll closing costs into my refinance?+
Yes, in most cases. Many lenders allow you to roll closing costs into the loan balance or accept a slightly higher rate in exchange for lender credits covering the costs (no-closing-cost refinance).
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