Qualifying & process

Refinance

Replacing your existing mortgage with a new one — usually to lower the rate, change the term, or tap equity. Worth it when savings outweigh closing costs before you move.

Full guide: requirements, costs and who cash-out refinances fit

Sources

What does refinance mean?

Refinancing replaces your current mortgage with a new one — to capture a lower rate, change the term, drop FHA insurance, or pull out equity in a cash-out. Because it is a brand-new loan, it carries closing costs, so the question is whether the monthly saving recovers those costs before you move or refinance again. That recovery point is the break-even, and it decides whether a refinance is worth it.

Refinance vs. alternatives that cost less

Recast — pay a lump sum toward principal and the lender re-amortizes the same loan at the same rate for a lower payment; no new loan or closing costs. Try the recast calculator.

Loan modification — a change to your existing loan’s terms for borrowers in hardship, arranged with the servicer.

Streamline refinance — reduced-paperwork refinances for existing FHA loans and VA loans (IRRRL).

Cash-out refinance — a refinance that also pays you part of your equity.

Frequently asked

When is it worth it to refinance?

When the monthly saving recovers the closing costs before you sell or refinance again — the break-even point.

A meaningful rate drop, a switch to a shorter term, or removing FHA insurance are the common triggers; a tiny rate cut rarely justifies the costs.

How does refinancing a mortgage work?

You take out a new mortgage that pays off the old one, ideally at a better rate or term.

It is a fresh loan, so it runs through underwriting, an appraisal and closing costs — usually 2–5% of the balance — which is why timing matters.

Does refinancing hurt your credit?

Only slightly and briefly. The lender’s hard credit pull and the new account can dip your score a few points, but the effect fades within months and is usually outweighed by the savings a good refinance delivers.