Frequently Asked Questions
When does refinancing make sense?
Refinancing typically makes sense when you can reduce your interest rate by at least 1%, save $100 or more per month, and plan to stay in your home long enough to recoup the closing costs. As a rule of thumb, divide your closing costs by your monthly savings to find your break-even point — if you'll stay past that, refinancing likely pays off.
What are typical refinancing closing costs?
Refinancing closing costs typically range from 2% to 5% of the loan balance, with the national average between $3,000 and $6,000. Common costs include origination fees (0.5%–1%), appraisal ($300–$600), title insurance ($500–$1,500), and recording fees. Some lenders offer no-closing-cost refinances, but they charge a higher rate to compensate.
What is a break-even point in refinancing?
The break-even point is the number of months it takes to recoup your refinancing closing costs through monthly savings. It's calculated by dividing total closing costs by your monthly payment reduction. For example, $4,000 in closing costs with $200/month savings = 20-month break-even. If you'll stay longer than that, refinancing makes financial sense.
Can I refinance with bad credit?
Yes, you can refinance with bad credit, but your options are more limited. Most conventional lenders require a minimum 620 credit score. FHA streamline refinance may allow scores as low as 580. With a lower credit score you'll receive a higher interest rate, which may reduce or eliminate your savings. Improving your credit before refinancing can significantly improve your rate.
How many times can I refinance my mortgage?
There is no legal limit on refinancing. However, each refinance costs $3,000–$6,000 in closing costs and triggers a hard credit inquiry. Most financial advisors recommend waiting at least 12–24 months between refinances and making sure your break-even is achievable given how long you plan to stay.