Is Now the Right Time to Refinance?

How to Determine Your Current Mortgage Terms

Before you can evaluate a refinance, you need to know the details of your current loan. Pull your most recent mortgage statement or log into your lender's portal to find your current interest rate, remaining balance, loan term, and monthly payment. Also note whether your loan is fixed-rate or adjustable, and whether you have private mortgage insurance (PMI).

Your current interest rate is the key baseline. If your rate is already below 4%, refinancing may not make financial sense given today's rates. According to the Consumer Financial Protection Bureau, nearly 60% of the 50.8 million active mortgages have interest rates below 4%. More than a fifth have rates at or above 5%, and 14.3% are at or above 6%.

• Find your current rate, balance, and remaining term on your mortgage statement.
• Identify whether your loan is fixed-rate or adjustable, and whether you pay PMI.
• Compare your current rate to today's refinance rates (see next section).

Sources: Consumer Financial Protection Bureau

How to Compare Refinance Rates vs Your Current Rate

Current refinance rates are generally 10-30 basis points higher than purchase mortgage rates, according to Investopedia. These rates vary by lender, location, and your financial profile.

To compare apples to apples, look at the annual percentage rate (APR), which includes lender fees and points, not just the interest rate. For example, the average APR for a 30-year fixed refinance was 6.58% as of May 1, 2026, while the average APR for a 15-year fixed refinance was 5.64%, according to Forbes Advisor. The APR gives a truer picture of the total cost.

• Get refinance quotes from at least three lenders to compare APRs.
• Ensure quotes are for the same loan term and type (e.g., 30-year fixed).
• Consider that your credit score and loan-to-value ratio affect the rate you're offered.

Sources: Investopedia, Forbes Advisor

How to Calculate the Break-Even Point

The break-even point is the number of months it takes to recover your refinancing costs through monthly savings. To calculate it, divide the total closing costs by your monthly savings. For example, a $400,000 loan with a rate reduction from 7.25% to 6.5% would reduce your monthly payment by $200, according to the CFPB.

The Federal Reserve notes that refinancing fees typically range from 3% to 6% of the outstanding principal. Make sure you plan to stay in the home past the break-even point to realize the savings.

• Step 1: Estimate total closing costs (typically 3%–6% of principal).
• Step 2: Calculate monthly savings (old payment minus new payment).
• Step 3: Divide total costs by monthly savings to get break-even months.

1. Gather your current payment and the new payment estimate from a lender.
2. Compute monthly savings: old payment - new payment.
3. Obtain a Good Faith Estimate of closing costs.
4. Divide total closing costs by monthly savings.
5. That result is the number of months to break even.

Sources: Federal Reserve Board, Consumer Financial Protection Bureau

What Closing Costs to Expect and How to Minimize Them

Closing costs on a refinance typically run 2% to 6% of the loan amount, according to LendingTree.

To minimize costs, shop around for lenders and compare fee schedules. Some lenders may offer 'no-closing-cost' refinances, but you'll likely pay a higher interest rate or roll the costs into the loan. Consider whether you'll stay in the home long enough to recoup the costs.

• Typical closing costs: 2%–6% of the loan amount.
• Compare multiple lenders' fee estimates.
• Ask about 'no-closing-cost' options versus rolling fees into the loan.

Sources: Federal Reserve Board, LendingTree

Step-by-Step Refinance Process Overview

The refinance process is similar to your original mortgage application, but it can be faster and less stressful if you're organized. Here's a typical sequence:

First, compare rates from multiple lenders. Second, apply with the lender you choose, providing income and asset documentation. Third, the lender will order an appraisal (unless you're using a streamline program). Fourth, you'll receive a loan estimate and can compare fees. Finally, you'll go through underwriting and closing.

The specific timeline for closing a refinance is not covered in current research; ask your lender for an estimated timeline.

1. Shop and compare refinance rates from at least three lenders.
2. Choose a lender and submit a full application with required documents.
3. Complete the appraisal if required (waived for some streamline programs).
4. Receive a loan estimate and review all fees and terms.
5. Provide any additional underwriting conditions promptly.
6. Schedule closing and sign the new mortgage documents.

Sources: LendingTree

How to Choose Between Rate-and-Term vs Cash-Out Refinance

A rate-and-term refinance lets you lower your interest rate or change the loan term without taking cash out. It's the most straightforward way to reduce monthly payments. Lenders typically require a minimum credit score of 620 for a conventional loan, while FHA loans may accept 500–580 depending on loan-to-value ratio.

A cash-out refinance allows you to borrow more than you owe and receive the difference in cash, but it increases your loan amount and may come with a higher rate. Conventional cash-out refinances typically require a 620 credit score and an 80% loan-to-value. You might use this option for home improvements or debt consolidation, but weigh the added debt and interest.

The table below compares the two main options.

Sources: Federal Reserve Board, LendingTree