Is now a good time to refinance my mortgage?

Refinancing your home loan can help you save money and update your loan’s terms, but timing is important. You can save more money if you refinance to a lower interest rate. Refinancing when rates are high will cost you more interest or increase your monthly payment. So, is now a good time to refinance your mortgage? We’ll help you understand the factors you should consider to make the best decision for your financial situation.

When is it a good time to refinance my home?

The best time to refinance your home depends on both your personal circumstances and current market conditions. You’ll want to factor in your individual financial needs as well as current mortgage rates before deciding on the “when.”

Ultimately, refinancing is worthwhile when it will save you money or let you access the equity in your home to meet a need, such as a home renovation or to pay an unexpected debt. There are a few ways refinancing can help you accomplish that.

If interest rates are lower

If interest rates are lower now than when you took out your current home loan, you could pay at the newer rate. Or, you may have to pay private mortgage insurance (PMI) on your current loan. If you have now accumulated over 20% equity in your home, refinancing is one way to write a new mortgage that does not require PMI.

Refinancing is also generally worth it if a homeowner can lower their interest rate by at least 2%. However, even a 1% rate decrease can make refinancing worth it depending on a homeowner’s financial situation. It’s important to weigh potential savings against the costs involved in refinancing.

If you need to access your home equity

If you have a significant expense or emergency cost to cover, you can apply for a cash-out refinance. This essentially allows you to use your property’s equity to cover the new expense. For instance, you may have a home improvement project to complete or education costs for your child.

Some homeowners use refinancing as an opportunity to consolidate their debt as well.

If you want to switch loan types

If your financial situation has improved since you took out your current mortgage, or if the market conditions offer better terms, you might be able to get a different type of loan that offers better terms.

One type of switch you could make would be from an adjustable-rate loan to a fixed-rate loan. The fixed-rate loan will give you the security of knowing your payment will remain the same while protecting you from possible future rate hikes.

If you want to shorten your loan term

For instance, if your income has gone up to where you can afford a higher monthly mortgage payment, you could refinance to a shorter-term loan. A shorter term means payments are larger, but you’ll pay the loan off faster, pay more equity and less interest over time, and build up equity faster. It also means you’ll pay significantly less for the cost of the loan over time.

If you want to lengthen your loan term

Conversely, for any number of reasons, you might find yourself struggling to meet your monthly mortgage payment. By refinancing the remaining principal to a longer-term loan, you can reduce your payment by spreading the loan out over a more extended period. Just understand that by lengthening your loan term, you will pay significantly more in interest over the life of the loan.

If you’ll benefit financially

Your current financial situation and needs should always be the driver of whether you should refinance. Refinancing can be the right move when it results in saving money in the present – whether to reduce your payment, for example, or to cash in on your equity to fund a current need – or in the future, since a lower rate adds up to thousands of dollars in savings over the course of the loan. It should serve your financial situation, but also allow you to comfortably cover closing costs or repayment.

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. However, you can expect every lender to use the same information during the approval process. You will have to provide them with details about your income, credit score, assets, debt, and more.

Here are some of the refinancing requirements you may need to meet while applying:

• A higher credit score (usually 620 and above)
• 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)

Again, the minimum requirements will vary based on the lender and type of loan. For example, if you refinance with a Federal Housing Administration (FHA) loan, it’s possible to get approved with a lower credit score. Rocket Mortgage^® requires a minimum score of 580 to qualify. In contrast, if you’re seeking a conventional loan, you’ll need a higher score that meets the 620 minimum.

Note that you may have less than 20% equity in your home and still be able to refinance. That said, you won’t be able to take out cash unless you have an excellent credit rating, and you may need to accept mortgage insurance or a higher interest rate.

Is it ever not worth it to refinance my mortgage?

There are several pros and cons to refinancing that you should be aware of, regardless of your desired timing or the urgency of the situation.  

Here are a few reasons it may not be worth it to refinance:

• Your savings from refinancing are minimal.
• Your monthly payment may increase if you shorten the repayment period.
• Your equity shrinks if you borrow against it in a cash-out refinance.

Because of these potential drawbacks, it’s important to carefully consider the decision to refinance. No matter how much you wish to do it, refinancing at the wrong time can harm your position in the short term, the long term, or both. Sometimes it’s better to wait for the right conditions to materialize.

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:

• Application fee: Your lender may charge you for your application even if you’re ultimately denied.
• Appraisal fee: It’s common for lenders to require appraisals when you refinance. Appraisers usually charge $600 – $2,000 for the service.
• Attorney fees: Depending on your state, an attorney may have to review and file paperwork for your refinancing loan. These fees will vary based on location.
• Title and insurance: Your lender will require a title search during the refinancing process.

Ways to make refinancing more affordable

Having to bring cash to the table for closing costs can be very prohibitive. To refinance a $200,000 mortgage, for example, you would have to pay between $6,000 and $12,000 at closing. Many people do not have that much cash in savings.

Some homeowners, however, may be able to roll their refinance closing costs into their overall loan balance and pay them down by degree with each mortgage payment. This depends on the lender, the loan type, and the amount of equity you have. Just know that you’ll now be paying interest on closing costs, and you may need to accept a higher mortgage rate in exchange.

The type of refinancing terms you look for should depend on your financial situation. First, you’ll want to make sure you can handle the monthly payments under the new mortgage. Second, the reason you seek a new mortgage (a better interest rate or cash for a home improvement, citing just two examples) can justify the amount in cash you must pay at closing. For help in making this determination, check out our refinance calculator.

How long does it take to refinance my house?

Refinancing is usually a quick process, typically taking from 30 – 45 days. But every situation is different, and certain factors may delay the process. You’ll find that the time required for third-party services, such as inspections and appraisals, can affect your closing period.

FAQ

If you’re still trying to decide if now is the right time to refinance your home, check out the answers to some frequently asked questions below.

When is it worth it to refinance?

It can be worth it to refinance whenever you can save money. What this means, though, will vary depending on the person. Refinancing could make sense if it gets you a lower interest rate, lowers your monthly payments, or allows you to access your home equity to pay for something important.

Other good reasons to refinance would be to switch from an adjustable-rate loan to a fixed-rate loan, or to drop mortgage insurance.

It’s important to understand that refinancing is not free. It usually costs about 3% to 6% of the loan. In some cases, borrowers can have the closing costs folded into the loan amount and pay them off with mortgage payments.

How much should interest rates drop to refinance?

Refinancing is generally worth it if you’re able to lower your interest rate by at least 1% - 2%, especially if you’re planning to stay in the house for at least a few years.

Are refinance rates going down?

As of June 2025, mortgage refinance interest rates hovered at 6.7% for a 30-year fixed-rate loan, with some experts predicting that rates will land between 6% and 7% for the next two years.

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

Refinancing your mortgage can be a great way to improve your financial position. You can lock in a lower interest rate and/or access your equity for cash to fund a home improvement project, consolidate debt, or cover educational expenses.  

A good lender can help you get the best rate and terms. They can also help you navigate the pros and cons of refinancing to make sure your new mortgage puts you in a better position.

Are you interested in refinancing your mortgage now? Take action and start your application with the Home Loan Experts at Rocket Mortgage.