When should I refinance my mortgage?

The general rule is to refinance when you can reduce your rate by at least 0.75%. Also consider refinancing if you can switch from an ARM to a fixed rate, remove PMI/MIP, or need cash for home improvements. Calculate your break-even point: divide closing costs by monthly savings.

How much does it cost to refinance?

Refinancing typically costs 2-5% of the loan amount in closing costs ($4,000-$10,000 on a $200K loan). Costs include appraisal ($300-$600), origination fee (0.5-1%), title insurance, and recording fees. Some lenders offer no-closing-cost refinances with a slightly higher rate.

What is the difference between rate-and-term and cash-out refinance?

Rate-and-term refinance replaces your current mortgage with a new one at a lower rate or different term. Cash-out refinance lets you borrow more than you owe and take the difference as cash. Cash-out typically has higher rates (0.125-0.5% more) and requires more equity (20%+ usually).

PILLAR GUIDE • UPDATED FEB 2026

Refinance Your Mortgage 2026

Q: What are current refinance rates?

As of February 2026, average refinance rates are: 30-year fixed at 6.10%, 15-year fixed at 5.40%, and FHA streamline at 5.85%. VA IRRRL rates start at 5.50%. Rates vary by credit score, loan-to-value ratio, and lender.

Q: Can I refinance with bad credit?

Yes, but options are limited. FHA streamline refinance requires no credit check if you're current on payments. VA IRRRL also has relaxed requirements. For conventional refinance, you typically need a 620+ credit score, though 680+ gets much better rates.

Save $200-$500/month by refinancing at today's rates. Complete guide to rate-and-term, cash-out, VA IRRRL, and FHA streamline refinancing.

Compare Refinance Rates

Current Refinance Rates (February 2026)

Average refinance rates in February 2026: 30-year fixed at 6.10%, 15-year fixed at 5.40%, FHA streamline at 5.85%, and VA IRRRL at 5.50%. If your current rate is above 7%, refinancing could save you $200-$500 per month on a typical mortgage.

30-Year Fixed

6.10%

15-Year Fixed

5.40%

FHA Streamline

5.85%

VA IRRRL

5.50%

Types of Mortgage Refinancing

There are 4 main types of refinancing: rate-and-term (lower your rate), cash-out (access equity), streamline (simplified process), and cash-in (reduce LTV). The right choice depends on your goals — saving money, accessing cash, or changing loan terms.

1. Rate-and-Term Refinance

Replace your mortgage with a new one at a lower rate or different term. Most common type. No cash out.

Best for: Lowering monthly payment or switching from ARM to fixedSavings: $100-$400/month typically

2. Cash-Out Refinance

Borrow more than you owe and take the difference as cash. Requires 20%+ equity. Rates slightly higher.

Best for: Home improvements, debt consolidation, major expensesSavings: Access $20K-$200K+ in equity

3. Streamline Refinance

Simplified process for FHA (FHA Streamline) and VA (IRRRL) loans. Less paperwork, no appraisal required in many cases.

Best for: Current FHA/VA borrowers wanting a lower rate quicklySavings: $100-$300/month, faster closing

4. Cash-In Refinance

Bring cash to closing to reduce your loan balance. Helps reach 80% LTV to eliminate PMI or qualify for better rates.

Best for: Removing PMI or qualifying for a lower rate tierSavings: PMI removal saves $100-$400/month

The 0.75% Rule: When to Refinance

The golden rule: refinance when you can reduce your interest rate by at least 0.75 percentage points. This typically ensures your monthly savings will exceed closing costs within 2-3 years (the break-even point). If you plan to stay in your home 5+ years, even a 0.50% reduction can be worth it.

Quick Break-Even Calculation

Example: $300,000 loan, rate drops from 7.25% to 6.10%
Monthly savings: $2,036 - $1,820 = $216/month
Closing costs: ~$6,000
Break-even: $6,000 ÷ $216 = 27.8 months (2.3 years)
Total savings over remaining 25 years: $64,800 - $6,000 = $58,800

Refinancing Costs Breakdown

Refinancing typically costs 2-5% of the loan amount ($4,000-$10,000 on a $200K loan). Major costs include appraisal, origination fee, title insurance, and recording fees. Some lenders offer no-closing-cost refinances by rolling costs into your rate.

Cost Item	Typical Range	Negotiable?
Appraisal	$300-$600	No
Origination Fee	0.5-1% of loan	Yes
Title Insurance	$500-$1,500	Partially
Recording Fees	$50-$250	No
Credit Report	$25-$50	No
Total (on $300K loan)	$4,000-$10,000	-

See How Much You Could Save

Compare refinance rates from top lenders and calculate your potential savings.

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5 Steps to Refinance Your Mortgage

The refinance process takes 30-45 days from application to closing. Start by checking your current rate, comparing offers from at least 3 lenders, and calculating your break-even point before committing.

Check Your Current Rate & Equity

Know your current rate, remaining balance, and estimated home value. You need at least 20% equity for the best terms (no PMI).

Compare Rates from 3+ Lenders

Get quotes from at least 3 lenders on the same day. Rates can vary by 0.5%+ between lenders, which translates to thousands in savings.

Calculate Your Break-Even Point

Divide closing costs by monthly savings. If break-even is under 3 years and you plan to stay longer, refinancing makes sense.

Lock Your Rate & Submit Application

Once you choose a lender, lock your rate (30-60 day locks are standard). Submit documentation: pay stubs, W-2s, tax returns, bank statements.

Appraisal, Underwriting & Closing

The lender orders an appraisal, processes your application, and prepares closing documents. Review the Closing Disclosure 3 days before closing.

Refinancing FAQ

When should I refinance?

When you can reduce your rate by 0.75%+ and plan to stay 3+ years. Also consider refinancing to remove PMI, switch from ARM to fixed, or access equity.

What are current refinance rates?

30-year: 6.10%, 15-year: 5.40%, FHA streamline: 5.85%, VA IRRRL: 5.50% (February 2026).

How much does refinancing cost?

2-5% of loan amount ($4,000-$10,000 on $200K). No-closing-cost options available at higher rates.

Rate-and-term vs cash-out refinance?

Rate-and-term changes your rate/term only. Cash-out lets you borrow against equity (requires 20%+, rates 0.125-0.5% higher).

Can I refinance with bad credit?

FHA streamline and VA IRRRL have relaxed credit requirements. Conventional needs 620+, but 680+ gets much better rates.

Compare Loan Types

FHA Loans Guide →

3.5% down, 580 credit

VA Loans Guide →

$0 down for veterans

Conventional Loans →

3-20% down, removable PMI