<h2 style="font-weight: 400; #0050b6;" id="refinancing-your-mortgage-can-be-a-smart-way-to-lower-your-monthly-payment-shorten-your-loan-term-or-access-cash-for-major-expenses">Refinancing your mortgage can be a smart way to lower your monthly payment, shorten your loan term, or access cash for major expenses. </h2>
<p>Whether now is the right time depends on your current interest rate, home value, credit score and long term financial goals. Understanding how refinancing works and how today's rate environment affects your options can help you make a confident decision.</p>
<p><strong>You may be a good candidate to refinance your mortgage loan if:</strong></p>
<ul>
    <li><p>Your current rate is at least 0.75-1% higher than today's rates</p></li>
    <li><p>You plan to stay in your home for 3-5+ years</p></li>
    <li><p>Your credit score has improved since you got your loan</p></li>
    <li><p>Your home value has increased</p></li>
    <li><p>You want to remove PMI</p></li>
</ul>
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<h3>Why Get a Mortgage Refinance?</h3>
<h4 style="font-size:1.2rem;">Lower Your Monthly Payment</h4>
<p>A refinance can reduce your monthly mortgage payment and free up cash for other priorities.</p>
<p>According to <a rel="noopener noreferrer" href="https://www.freddiemac.com/pmms" target="_blank" title="www.freddiemac.com is an external website">Freddie Mac</a>, on January 22, 2026, the average 30-year fixed mortgage rate has dropped to 6.09%, nearly a full percentage point lower than the 6.96% average seen just one year ago. For a homeowner with a $400,000 mortgage balance, dropping their rate by just 1% could save approximately $269 per month, representing nearly a 20% reduction in their monthly principal and interest payment.</p>
<h4 style="font-size:1.2rem;">Pay Off Your Mortgage Faster</h4>
<p>Refinancing from a 30 year mortgage to a 15 year mortgage can help you build equity faster and reduce total interest paid. Even if you keep a 30 year term, you can use monthly savings to make extra principal only payments and shorten your payoff timeline.</p>
<h4 style="font-size:1.2rem;">Tap Equity Through a Cash Out Refinance</h4>
<p>A cash out refinance allows you to borrow against your home equity at a lower rate than most personal loans or credit cards. Homeowners often use cash out funds for:</p>
<ul>
    <li><p>Home renovations</p></li>
    <li><p>Debt consolidation</p></li>
    <li><p>Education expenses</p></li>
    <li><p>Major purchases</p></li>
</ul>
<p>Use our <a href="/personal/support/calculators/should-i-refinance-my-mortgage">Mortgage Refinance Calculator</a> to estimate your potential savings.</p>
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<h3>When Is the Right Time to Refinance?</h3>
<p>Every homeowner's situation is different, but two factors matter most:<br />
<strong>(1) whether today's rates are lower than your current rate, and (2) how long you plan to stay in your home.<br></strong></p>
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<p style="text-align: center;"><span style="font-size: 32px;">“If interest rates have decreased by 1% or more compared to your current loan terms and you intend to stay in your home for 5+ years, it's likely a good time to refinance.”</span></p>
<p style="text-align: center; font-size: 28px;"><strong>- Jill Emanuel</strong><br />
<span style="font-size: 18px;"></span><span style="font-size: 18px;">Lead Financial Coach at <a href="https://fiscalfitnessphx.com/" target="_blank">Fiscal Fitness Phoenix</a></span></p>
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<p>
This guideline still applies today. However, with <strong>average 30 year fixed mortgage rates in the 6% range in early 2026</strong>, refinancing into a lower rate is most beneficial for homeowners who currently have <strong>rates above today's market levels</strong>, such as those who locked in mortgages at <strong>6.5% or higher</strong>.</p>
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<h3>Calculate Your Break Even Point</h3>
<p>Before refinancing, understand the closing costs and how long it will take to recoup them. </p>
<p>"Divide your total closing costs by your monthly savings. The fewer months it takes to break even, the more sense refinancing makes." says Nadia Evangelou, senior economist and director of forecasting for the <a rel="noopener noreferrer" href="https://www.nar.realtor/" target="_blank">National Association of REALTORS<sup>®</sup></a>. </p>
<p>Not every situation is a fit. If you plan to move soon or your credit score has dropped, refinancing may not be the best choice.</p>
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<h3>Keep Your Mortgage Term, Get a Lower Interest Rate</h3>
<p>Some people who have already been paying their current mortgage for several years might not want to sign up for another 30 years of mortgage payments – but you don't have to. Depending on the lender, you might be able to refinance at a lower interest rate, but for the same term of years remaining on your current home loan.</p>
<p>“Underwriters can write the terms of the loan for any length of time you request," Emanuel explains. "If you currently have 23 years left on your mortgage, for example, you can ask to have your new mortgage written for a 23-year term."</p>
<p>This flexibility helps homeowners avoid “resetting the clock” while still taking advantage of a refinance <strong>if today's market rate is lower than their current rate</strong>.</p>
<p>If your goal is to reduce your monthly payment as much as possible, refinancing into a new 30 year term may still offer the biggest drop. But if you want to save on long term interest while keeping your payoff timeline on track, a <strong>custom term refinance</strong> can offer the best of both worlds.</p>
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<h3>Why Refinance Your Mortgage Now?</h3>
<p>Mortgage rates remain higher than the historic lows of 2020–2021, which has slowed refinancing activity. However, homeowners are still refinancing for several reasons:</p>
<ul>
    <li><p><strong>Shorter loan terms</strong> to pay off the mortgage faster</p></li>
    <li><p><strong>Cash out refinances</strong> for renovations or debt consolidation</p></li>
    <li><p><strong>Lower monthly payments</strong> to improve cash flow</p></li>
</ul>
<p>Whether refinancing makes sense for you depends on your goals, your current rate and how long you plan to stay in your home.</p>
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<h3>Ready to Explore Your Options?</h3>
<p>Whether you want to lower your monthly payment, access cash for renovations, or pay off your mortgage faster, refinancing can help you reach your financial goals.</p>
<p>Find a Mortgage Loan Officer to discuss your options.</p>
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<h3>FAQs</h3>
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<h2 style="text-align: left;" id="how-much-can-i-save-by-refinancing-my-mortgage"><span style="font-size: 20px;">How much can I save by refinancing my mortgage?</span></h2>
<p>Most homeowners save<strong> $150–$300 per month</strong> when they refinance into an interest rate that's <strong>about 1% lower</strong> than their current mortgage. Your exact savings depend on your loan balance, remaining term, and the new rate you qualify for.</p>
<p><strong>Quick example</strong></p>
<p>A homeowner with a <strong>$400,000</strong> mortgage who lowers their rate by <strong>1%</strong> typically reduces their monthly principal and interest payment by around <strong>$250–$300</strong>.</p>
<p><strong>Long term impact</strong></p>
<p>Even a $250 monthly reduction adds up:</p>
<ul>
    <li><p><strong>$3,000 per year</strong> in savings</p></li>
    <li><p><strong>$15,000 over five years</strong></p></li>
    <li><p>Potentially <strong>tens of thousands</strong> saved in total interest if you also shorten your loan term</p></li>
</ul>
<p>Refinancing can also increase savings if you remove PMI, consolidate high interest debt, or switch to a shorter mortgage term.</p>
<h2 style="text-align: left;" id="how-long-does-a-mortgage-refinance-take"><span style="font-size: 20px;">How long does a mortgage refinance take?</span></h2>
<p>Most refinances take <strong>30-45 days</strong>, depending on appraisal timelines and lender volume.</p>
<h2 style="text-align: left;" id="what-are-typical-closing-costs-for-refinancing"><span style="font-size: 20px;">What are typical closing costs for refinancing?</span></h2>
<p>Expect<strong> 2-6% of your loan amount</strong>, depending on lender fees, appraisal costs, and loan type.</p>
<h2 style="text-align: left;" id="is-it-worth-refinancing-if-rates-are-still-high"><span style="font-size: 20px;">Is it worth refinancing if rates are still high?</span></h2>
<p>Yes, especially if your current rate is higher than today's market, your credit score has improved, or you want to remove PMI or shorten your term.</p>
<h2 style="text-align: left;" id="how-do-i-apply-for-a-mortgage"><span style="font-size: 20px;">How do I apply for a mortgage?</span></h2>
<p>Help streamline your mortgage application process with <a href="/personal/mortgage/mortgage-application-checklist">this checklist</a>.</p>
</section><br />
<p style="text-align: center;"><a href="/personal/mortgage/refinancing-a-home" class="cta-blue-fill-button">Learn more about refinancing</a></p>

When Is the Right Time To Refinance a Mortgage Loan?

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When Is the Right Time To Refinance a Mortgage Loan?