Is now a good time to refinance my mortgage?

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Refinancing your mortgage lets you replace your existing home loan with a new one. That gives you the opportunity to change lenders, adjust loan details, such as the interest rate or repayment term, or take equity out of your home by refinancing into a loan with a larger balance.

Refinancing can be a good way to lower your monthly payment, save money on interest, or turn equity into cash you can use for other purposes.¹ We’ll break down when refinancing might be a good move and how to decide if it’s right for you.

Key takeaways:

• The most important thing to understand is your goal with the refinance. Knowing this makes it easier to determine whether the timing makes sense.
• Understand the eligibility requirements associated with the refinance you’re trying to qualify for. In general, the better qualified you are, the better your interest rate.
• Refinancing can be made more affordable by taking lender credits toward closing costs, but this does mean a higher rate.

When is it a good time to refinance my home?

The short answer to the question of when it’s a good time to refinance is to do so when you’ll benefit financially. We’ll go over what that looks like as well as several ways refinancing might accomplish that.

If you’ll benefit financially

Benefitting can mean anything from lowering your monthly payment to shortening the loan’s term so you can get out of debt more quickly. Home equity can be used to consolidate debt or pay for home improvements.

However, it’s important not to spread yourself too thin. If you refinance to a shorter term and boost your monthly payment, you might struggle to afford higher payments and face foreclosure or be unable to achieve other financial goals, like saving for a car or retirement.

Look at your total financial picture and think about how refinancing will change your finances. Is doing so in line with your financial goals? Will you save money over the long run or each month? Can you handle the new payment? If you think it’ll have a positive financial impact overall, refinancing makes sense.

If interest rates are lower

If interest rates have fallen since you last got a mortgage, refinancing could not only lower your monthly payment, but it can reduce the amount of interest you pay over the term relative to your prior loan. But to understand whether the rate drop will be worth it, we need to talk about the refinance break-even point.

When you refinance, you have to pay closing costs again. First, think about how long you plan to stay in your house. Then do the following equation:

Break-even point = Closing costs ÷ Monthly savings

The equation will give you the number of months you have to stay in your home to make the cost of refinancing make sense. If you plan on being in your home longer than the result, you should do it.

If you need to access your home equity

Your home equity is the value of your home minus the remaining balance of your mortgage. It’s an asset of value that you have, but you can’t spend your home equity like you can spend cash.

Refinancing gives you the opportunity to use your home equity for another purpose.

Imagine you have a home worth $400,000 and a mortgage of $250,000. You could use a cash-out refinance to a new mortgage of $300,000 and access $50,000 in equity that you could use to pay off other debts, cover home improvements, or for other purposes.

Increasing your loan’s balance does mean increasing your monthly payment and the overall cost of your mortgage, but you may decide it’s worth doing if you can use your equity in another way.

If you’d rather avoid refinancing, you can also tap your home equity using a home equity loan or home equity line of credit (HELOC). Both are types of second mortgages. Home equity loans give you a lump sum of cash you can use, while HELOCs are a credit line you can tap multiple times on an as-needed basis, offering some flexibility. The funds can be used for remodeling your home, consolidating debt, or other things.

Rocket Mortgage doesn’t offer HELOCs, but we do offer cash-out refinances and Home Equity Loans.² When deciding whether to do a cash-out refinance or leave your current mortgage alone and do a Home Equity Loan or HELOC, a Home Loan Expert can help you with a blended rate calculation to help you determine which makes the most sense.

When cashing out home equity, you’ll be required to get a home appraisal so the lender knows exactly how much equity you have.

If you want to switch loan types

When you refinance, you can get an entirely new type of loan. For example, if you had an FHA loan, which is usually aimed at people with less savings and lower credit, you could refinance to a conventional loan, which may have better rates and let you avoid paying for mortgage insurance if you have at least 20% equity.

You could also trade in your adjustable-rate mortgage (ARM) for a fixed-rate loan. ARMs often have lower rates than fixed-rate mortgages at first, but after the introductory period ends, the rate will rise or fall along with market interest rates. In some cases, the rate of your ARM and your monthly payment could rise to the point of being unaffordable.

Refinancing to a fixed-rate loan gives you a chance to secure some certainty and peace of mind by ensuring that your principal and interest payment won’t change over the life of your loan.

If you want to shorten your loan term

Loans with shorter terms usually have lower interest rates. They also let you build equity more quickly and pay off your loan sooner. Since shorter-term loans are paid off faster, they have higher monthly payments.

If you want to lengthen your loan term

Choosing a longer term means it’ll take more time to pay off your mortgage and to own your home free and clear. However, it could allow you to reduce your monthly payments, which can offer budget flexibility or let you dedicate more money to other goals, like investing.

Am I eligible to refinance?

You’ll need to meet eligibility requirements if you want to refinance your mortgage. These requirements will vary based on the lender you work with. You can expect most lenders to use the same information during the approval process. You’ll have to provide details about your income, credit score, assets, debt, and employment history.

While requirements may vary by lender, here are some general guidelines applicable at Rocket Mortgage:

• A qualifying credit score (for example, it’s 580 for an FHA loan, VA loan, or a conventional cash-out refi)^3,4,5
• With the exception of VA loans, at least 20% equity in your home in the case of a cash-out refinance
• A lower debt-to-income ratio (usually 43% or lower)

Depending on the type of loan refinancing you apply for, you may be able to have less than 20% equity in your home. But this may require mortgage insurance. Regardless of loan type, having good credit will allow you to secure better terms, including the potential for lower interest rates.

Is it ever not worth it to refinance my mortgage?

While refinancing can have its benefits, it’s not always a good idea. Let’s run through a couple of scenarios when it may not make sense.

Let’s say you want to refinance because rates are lower. But you also plan to move out within 2 years. When you refinance, you pay closing costs again on the new mortgage. If you do the breakeven equation and find that you will be moved out before the monthly savings outweigh the costs, you should avoid refinancing.

In other cases, you might be looking to refinance to do a home improvement project. But most lenders require that you leave 20% equity in your home after a cash-out refinance. If you’ve only been in your house a short time, you may not have built up enough equity to fund the project.

Consolidate debt with a cash-out refinance

Cash-out refinancing involves taking a bigger balance on a new loan than you have on your existing mortgage. This can be used for many purposes, including debt consolidation.

According to Forbes, the average credit card interest rate right now is 25.19%. By comparison, the 30-year fixed mortgage rate average in the Freddie Mac Primary Mortgage Market Survey® was 6.48% for the week of June 4.

For this reason, it’s often attractive to pay off the balance of your credit card with funds from your mortgage so that you're paying the debt at a much lower rate going forward. But as you do this, consider both closing costs and a blended rate calculation comparing cash-out scenarios with home equity loans or HELOCs.

How much will it cost to refinance my home?

Generally, you should expect to pay from 3% – 6% of your loan’s total value when refinancing. This amount will cover your overall closing costs, including attorney fees and title insurance. There are ways to lower this amount. We’ll get into the benefits and trade-offs of these strategies below.

To check your own numbers, use this refinancing calculator.

Ways to make refinancing more affordable

If you’re looking to lower or eliminate closing costs, there are a few strategies you might employ.

• Shop around: If you’re well qualified, lenders might be willing to lower or waive some of their fees. Negotiation power is greater for items within a lender’s control, such as processing or origination, than for third-party fees, such as appraisals.
• Built into the loan amount: Some loan options allow for certain fees to be built into the balance of the loan without impacting its overall structure. You may also be able to take advantage of this regardless of the loan if you have enough existing equity.
• Lender credits: Lenders may cover your closing costs in exchange for you taking a slightly higher interest rate.

Whether the costs are built into the balance or covered via lender credits, you’re spreading your closing costs out over time and paying interest on them. A no-closing-cost mortgage may be an option, but you pay those costs eventually.

How long does it take to refinance my house?

According to ICE Mortgage data, the average time to close a refinance was around 39 days as of May 2026. But the time frame for this can be highly variable, anywhere from 15 to 60 days or more.

In addition to going through the underwriting process, if you need an appraisal or survey, this may take longer to schedule, depending on the availability of professionals and demand in the area. Additionally, you can’t close until you’ve had at least 3 business days to review the Closing Disclosure.

FAQ

Before you make any big refinancing decisions, let’s break down a few of the big questions.

When is it worth it to refinance?

If you’re looking to lower your interest rate, it’s important to note the breakeven point where the closing costs make sense. If you’re looking to access home equity for home improvement or debt consolidation, you want to make sure you have enough equity and that it makes sense vs. a home equity loan or HELOC based on a blended rate.

How much should interest rates drop to refinance?

There is no specific number you should target. The real question is whether you’re going to remain in the house long enough for the closing costs to make sense relative to the monthly savings. Again, it goes back to that break-even point.

Are refinance rates going down?

Based on the Freddie Mac survey, rates are up 0.3% since the beginning of the year. Inflation continues to be a battle as the Iran conflict has exacerbated higher pricing. This causes interest rates to be higher based on trying to keep the return above the inflation rate.

The bottom line: When is it a good time to refinance your home?

Refinancing takes time, and there’s an upfront financial cost. Start by considering what your goals are. If you’re looking to lower your rate, figure out break-even point. To access equity, make sure you have enough to accomplish your goals. A blended rate calculation will help you decide between a refi and a home equity loan or HELOC.

If you’re ready to go over options, you can apply online with Rocket Mortgage.

¹Refinancing may increase finance charges over the life of the loan.

² Home Equity Loan product requires full documentation of income and assets, credit score and max loan-to-value (LTV), combined loan-to-value (CLTV), and home equity combined loan-to-value (HCLTV) ratios. Requirements were updated 11/19/25 and are tiered as follows: 680 minimum FICO with a max LTV/CLTV/HCLTV of 80%, 700 minimum FICO with a max LTV/CLTV/HCLTV of 85%, and 740 minimum FICO with a max LTV/CLTV/HCLTV of 90%. Your debt-to-income ratio (DTI) must be 50% or below. Valid for loan amounts between $45,000.00 and $500,000.00 (minimum loan amount for properties located in Michigan is $10,000.00). Product is a second standalone lien and may not be used for piggyback transactions. Product not available on Ameriprise products. Guidelines may vary for self-employed individuals. Some mortgages may be considered “higher priced” based on the APOR spread test. Higher‑priced loans in the State of New York are subject to additional regulatory requirements. Additional restrictions apply. This is not a commitment to lend.

³Rocket Mortgage is not acting on behalf of FHA or HUD

⁴To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.

⁵ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

Rocket Mortgage is a trademark or service mark of Rocket Mortgage LLC or its affiliates.