The big idea: a refinance should leave you better off. This hub helps you decide if it will, and which type fits your goal.
Refinancing swaps your old mortgage for a new one. The main types are rate-and-term (a better rate or term, no cash out) and cash-out (a bigger loan that gives you cash). There are also streamline options for FHA and VA loans. A refinance usually makes sense when your savings beat the closing costs before you sell — your break-even point — or when it reaches a clear goal.
What this means
Every refinance has a cost and a benefit. The cost is closing costs. The benefit might be a lower rate, a lower payment, a shorter term, removed mortgage insurance, or cash in hand.
To decide, you weigh the two and check your timeline. If you will stay past the break-even point, or the goal is worth it, refinancing can be smart. See Refinance Check-Up (Is it worth it).
How it works (the main refinance types)
| Type | What it does | See |
|---|---|---|
| Rate-and-term | Improves your rate or term, no cash out | Rate-and-Term Refinance |
| Cash-out | New, larger loan; you take cash | Cash-Out Refinance |
| FHA Streamline | Simpler refinance for FHA loans | FHA Streamline Refinance |
| VA IRRRL | Streamline refinance for VA loans | VA IRRRL (VA Streamline) |
Common refinance goals
- Lower my payment. Through a lower rate, longer term, or PMI removal. See Lower My Payment.
- Lower my rate. When the market or your credit improves. See Lower My Rate.
- Pay off faster. By switching to a shorter term.
- Remove PMI. Once you have enough equity. See Remove PMI.
- Get cash. For a big project or to pay off higher-rate debt. See Cash-Out Refinance.
- Leave an ARM. For the safety of a fixed rate.
The break-even point
The key number is how long it takes your monthly savings to cover the closing costs.
| Item | Example |
|---|---|
| Closing costs | $6,000 |
| Monthly savings | $200 |
| Break-even | 30 months |
If you will keep the loan past the break-even point, refinancing usually pays off. This is a rounded example, not a quote.
Requirements (at a glance)
| Requirement | Typical refinance rule |
|---|---|
| Equity | More equity gives more options |
| Credit score | Often 620+ (higher helps) |
| Income | Must show ability to repay |
| Appraisal | Often required (streamlines may skip it) |
| Property | Primary, second home, or investment (rules vary) |
Benefits
Things to watch (honest notes)
What it looks like in practice
Example is for learning only. Your results depend on your loan and the market.
Common mistakes
This page is for education only. It is not a loan offer or a promise of approval, rates, savings, or terms. Your results depend on your individual circumstances. Equal Housing Opportunity · NMLS #362311 · CA DRE #01871814.
