When Should I Refinance My Mortgage

Couple meeting with a loan officer or broker in their home.

Interest rates are at all-time lows, making it hard not to refinance right now. It might seem like everyone around you is jumping on board.

But that doesn’t mean the time is right for you.

Before you refinance your mortgage, learn when is the best time to refinance and what to look for before deciding.

When to Refinance Your Mortgage

Knowing when to refinance is the biggest hurdle to the refinancing process.

Here’s why:

If you refinance your mortgage at the wrong time, it could cost you more money.

But if you wait to refinance at the right time?

You can get more significant savings on your monthly payments and over the life of the loan.

That means more money in your pocket!

But, before you refinance, consider these questions:

  • How much did rates fall? 
  • Are they below my current rate? 
  • If so, how much lower are they?

Generally, refinancing could be a smart move if your rate could be 1% or more below your current rate.

But that’s just the rule of thumb.

While the savings you get is typically high enough with a 1% drop to make refinancing worthwhile, that’s not the only time.

You might refinance if:

  • Your credit score or financial situation improved.
  • You want to convert from an adjustable-rate mortgage (ARM) to a fixed-rate loan.
  • You can eliminate private mortgage insurance.
  • You want to tap into your home's equity. 



Ok, But Should I Refinance My Mortgage?

Even if you check all the boxes, two questions can help you decide if you really should refinance your mortgage.

When Will You Break-Even?

Your break-even point is how long it will take to see the savings after factoring in the cost of refinancing.

Because refinancing isn’t free:

You’ll pay closing costs and might incur other fees as part of the process.

For example, let’s say you can refinance your mortgage and go from 4.5% to 3.0% interest, saving you $175 per month.

It sounds like a no-brainer, right?

But don’t forget about closing costs.

It costs just over $5,000 on average to close on a home loan.

At that rate, it would take a little over two years to “break-even” on how much the refinance cost compared to your mortgage savings.

But what if you’re looking to sell the home and move in three years?

There, refinancing makes little sense.

However, if this is your “forever home,” saving $175 a month for the length of your mortgage could result in tremendous savings.

What’s My Financial Situation?

After calculating your break-even point, the next step is to think about your situation. 

To know if now is a good time to refinance, ask yourself:

  • Is my credit good enough to get approved for a lower interest rate?
  • Do I owe less than 80% of the home’s value, so I don't have to pay mortgage insurance?
  • Can I afford to pay closing costs?
  • Why do I want to refinance?

Figuring out why you want to refinance can go a long way to determining if you should go through with it.

Are you trying to pay the loan off faster, save money, cash in on equity or something else?


Before you decide to refinance it is important to consider all the factors from the small details to the big picture. If you chose the wrong time it can cost you money, time and some sanity.

The Wendy Thompson Team is here to help you make the right choice for your family.

How Soon Can You Refinance a Mortgage?

How soon you can refinance depends on the lender and the type of refinance you want.

Depending on your situation, you could refinance a mortgage loan immediately. For instance:

  • To do a cash-out refinance and tap into your home’s equity, some lenders require you to wait six months after your current mortgage loan closed. 
  • To refinance an FHA loan with a cash-out refinance, you must have owned and occupied the home for at least 12 months.
  • If your home went up in value and you want to take advantage of the increased value, you must pay for and wait to have a new appraisal done before proceeding with the refinance.

Generally, unless you used a government-backed mortgage program – such as an FHA or VA loan – there isn't usually a timeline of when you can refinance if you go with a different lender.

How Much Does It Cost to Refinance a Mortgage?

Each lender can charge different fees to refinance a mortgage. Shopping around can help you find the loan with the best terms and costs for your situation.

Typically, you’ll pay between 2% to 6% of your loan amount in closing costs.

So, how much it costs to refinance depends on how much you’re borrowing with your refinance loan.

The national average closing costs for a refinance are $5,749.

Your costs can include:

  • Early repayment fees: Some lenders charge a penalty to pay off a mortgage early.

  • Discount points: You can prepay points to secure a lower interest rate on your mortgage.
  • Origination fees: This covers the lender’s costs to process and underwrite your loan.
  • Appraisal and inspection fees: Your lender can require an appraisal to determine the home’s value and may order termite and pest inspections.

Is Refinancing right for you?

For most people, refinancing saves money monthly and over the loan’s term. But there are a lot of factors to consider, take our quiz to see what is right for you.

How Long Does It Take to Refinance a Mortgage? 

The time to refinance is usually faster than when you got your initial mortgage.

Although the timeline can vary by lender, it generally takes 30 to 45 days to refinance a mortgage.

It can depend on how busy the lender is. If interest rates have fallen, many homeowners may want to refinance at the same time.

And the influx of refinancing applications can slow down the process.

If you’re concerned about how long it will take, talk to each lender to find the best refinance loan option for you.

Is It Time to Refinance Your Mortgage?

With falling interest rates, you might be tempted to rush into a mortgage refinance to take advantage of the low rates.

Before you do, look at the big picture to determine if the timing is right.

For most people, refinancing saves money monthly and over the loan’s term. But consider your financial goals, how long you plan to stay in the home and your credit score.

Even if it might save you money, doing it at the right time is the key to maximum savings when you refinance your mortgage.