What credit score do you need to refinance a mortgage?

The minimum credit score to refinance depends on the loan type. Conventional refinances generally require a 620 minimum, though you'll need 740 or higher to qualify for the best rates. FHA refinances allow scores as low as 580 (or 500 with 10% equity). VA loans have no official minimum, but most lenders require at least 620. A higher score directly lowers your interest rate and can save tens of thousands of dollars over the loan life.

How much does it cost to refinance a mortgage?

Refinance closing costs typically run 2% to 5% of the loan amount — between $6,000 and $15,000 on a $300,000 mortgage. The main costs are lender origination fees (0.5–1%), appraisal ($400–$700), title search and insurance ($1,000–$2,500), and state-specific taxes and recording fees. You can pay upfront, roll costs into the loan, or accept a slightly higher rate in exchange for a lender credit that covers fees.

How long does it take to refinance a mortgage?

A typical mortgage refinance takes 30 to 45 days from application to closing. The timeline depends on how quickly you submit documentation, how busy the lender's underwriting team is, and whether your appraisal raises any issues. FHA streamline and VA IRRRL refinances can close faster — sometimes in as little as 2 to 3 weeks — because they require less documentation and no new appraisal.

What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between the new loan amount and your current balance is paid to you in cash at closing. Most lenders cap cash-out refinances at 80% of your home's appraised value for conventional loans. Texas limits all cash-out refinances to 80% LTV by constitutional law. The cash can be used for home improvements, debt consolidation, or any other purpose.

When does refinancing make financial sense?

Refinancing makes financial sense when your monthly savings from the new rate exceed your closing costs before you sell or move — this is called the break-even point. Divide total closing costs by your monthly savings to find how many months it takes to recoup the cost. If you plan to stay in the home past that point, refinancing is likely worth it. A rate drop of 0.5% to 1% or more typically justifies the process on a loan balance of $200,000 or higher.

Can you refinance an FHA loan?

Yes. FHA loans can be refinanced through an FHA streamline refinance (fast, no appraisal, no income verification required — just a demonstrated benefit such as a lower payment), an FHA cash-out refinance (up to 80% LTV), or a conventional refinance. Refinancing out of FHA to a conventional loan makes sense when your LTV drops to 80% or below, because conventional loans allow PMI cancellation while FHA mortgage insurance premium (MIP) typically stays for the life of the loan.

How do I remove PMI through refinancing?

PMI on a conventional loan cancels automatically at 78% LTV or can be requested at 80% LTV. If your home has appreciated significantly, you may already be below 80% LTV even if you haven't paid down much principal — in which case a new appraisal and a rate-and-term refinance (or simply requesting cancellation from your current lender) can eliminate PMI without closing costs. Use the PMI removal calculator to estimate your current LTV and monthly savings from eliminating PMI.

Mortgage Refinancing: The Complete Guide

Q: What is mortgage refinancing?

Mortgage refinancing is the process of replacing your existing home loan with a new one — typically to get a lower interest rate, reduce your monthly payment, change your loan term, or access home equity. You apply with a lender, get approved, and the new loan pays off the old one. You then make payments on the new mortgage.

What This Guide Covers

Mortgage refinancing touches a dozen different topics — each one covered in depth in a dedicated article on this site. This page gives you a working understanding of every topic and points you to the right resource to go deeper.

1What Is Mortgage Refinancing?

Mortgage refinancing means replacing your existing home loan with a new one. The new loan pays off the old one — and you start making payments to the new lender (or the same lender, if you stay) under the new terms.

The most common reason homeowners refinance is to get a lower interest rate, which reduces the monthly payment and the total interest paid over the life of the loan. But rate reduction is not the only reason. Homeowners also refinance to:

Shorten the loan term — move from a 30-year to a 15-year mortgage to pay off the home faster and save significant interest, even if the monthly payment rises
Access home equity — borrow against the value of the home through a cash-out refinance
Remove PMI — if the home has appreciated and the loan-to-value ratio is now below 80%, refinancing can eliminate private mortgage insurance
Switch loan type — move from an adjustable-rate mortgage (ARM) to a fixed rate, or out of an FHA loan to avoid lifetime mortgage insurance
Add or remove a borrower — following a divorce or the death of a co-borrower

The Break-Even Point

The single most important number in any refinance decision is the break-even point — the number of months it takes for your monthly savings to repay the closing costs. Divide total closing costs by monthly payment reduction. If you plan to stay in the home longer than that, refinancing is worth it.

Example: Closing costs of $8,000 ÷ monthly savings of $200 = 40 months (3.3 years) to break even. If you plan to move in 2 years, refinancing costs you money. If you plan to stay 10 years, you come out significantly ahead.

Typical timeline

30–45 days

Closing costs

2%–5% of balance

Break-even avg

2–4 years

Credit pull

Hard inquiry

Full refinance process guide → Break-even calculator → The 1% refinance rule → How much can you save? →

2Types of Refinancing

Not all refinances work the same way. The type you choose determines the documentation required, how much equity you need, and what you can do with the loan proceeds.

Rate-and-Term Refinance

Changes your interest rate, loan term, or both — without adding to your loan balance. The most common type. No cash is taken out.

Cash-Out Refinance

Replaces your mortgage with a larger new loan. The difference is paid to you in cash at closing. Requires more equity — typically 20% remaining after the cash-out.

Cash-In Refinance

You bring a lump sum to closing to reduce the loan balance, often to get below an LTV threshold for better rates or to remove PMI.

Streamline Refinance

Simplified refinance for existing FHA or VA borrowers. Less paperwork, no new appraisal in most cases, and faster closing. Rate reduction must be demonstrated.

No-Closing-Cost Refinance

Closing costs are either rolled into the new loan balance or covered by a lender credit in exchange for a slightly higher interest rate. No cash needed at closing.

Short Refinance

The lender agrees to refinance an underwater mortgage for less than is owed to help the borrower avoid foreclosure. Rare and requires lender agreement.

ℹ️

Most homeowners choose rate-and-term. If your goal is simply to lower your payment or pay off the loan faster, a standard rate-and-term refinance is simpler, cheaper, and has fewer restrictions than a cash-out refinance.

See 10 real refinance situations →

3Qualification Requirements

Mortgage refinance requirements are set at two levels: federal guidelines from Fannie Mae, Freddie Mac, FHA, and VA, and lender overlays that may be stricter. The core qualification factors are the same as purchasing a home.

Credit Score

Conventional refinances require a minimum 620 credit score, though the best rates go to borrowers at 740 or above. FHA allows as low as 580. VA has no official floor, but most lenders require 620. Every 20-point improvement in your score can meaningfully lower your rate.

Loan-to-Value Ratio (LTV)

LTV is your loan balance divided by the home's appraised value. Most lenders want 80% LTV or below for the best rates. Above 80%, you may be required to pay PMI (on conventional loans) or accept a higher rate. Cash-out refinances are typically capped at 80% LTV. Check your current LTV with the LTV calculator.

Debt-to-Income Ratio (DTI)

DTI is your total monthly debt payments divided by your gross monthly income. Most conventional lenders cap DTI at 43–45%, though some allow up to 50% with compensating factors. FHA is slightly more flexible. Calculate your new housing expense with the new mortgage payment estimator.

Income Verification

Expect to provide the last two years of W-2s or tax returns, recent pay stubs (30 days), and two months of bank statements. Self-employed borrowers typically need two years of business tax returns and a year-to-date profit-and-loss statement. FHA streamline and VA IRRRL refinances waive income verification in most cases.

Seasoning Requirements

Most loan programs require you to have owned the home and made payments for at least 6 months before you can refinance. FHA cash-out requires 12 months of ownership. Texas requires 12 months between cash-out refinances on a homestead property.

Conventional min score

620

Best rate threshold

740+

Target LTV

≤80%

Max DTI (conv.)

43–45%

Seasoning

6–12 months

Full step-by-step refinance process →

4Refinance Closing Costs

Refinancing is not free. Closing costs typically run 2% to 5% of the loan amount — between $6,000 and $15,000 on a $300,000 loan. These costs are unavoidable in a standard refinance, though you can choose how you pay them.

What You're Paying For

Origination fee (0.5%–1% of loan): The lender's fee for processing and underwriting your application. The most negotiable line item.
Appraisal ($400–$700): A licensed appraiser values your home to confirm the property supports the new loan amount.
Title search and insurance ($1,000–$2,500): Verifies no liens or claims on the title; insures the lender (and optionally you) against future title disputes.
Recording fees (varies by state): County fee to record the new mortgage in public records. In New York City this can exceed 1.9% of the loan amount.
Prepaid items: Homeowners insurance premium, property taxes, and prepaid interest from closing day to month-end. Not negotiable but not new costs — you'd pay them regardless.

Your Three Payment Options

Pay upfront — lowest total cost; recoup through monthly savings at the break-even point.

Roll into the loan — no cash at closing, but you pay interest on those costs for the life of the loan. Rolling $8,000 into a 30-year loan at 6.5% adds roughly $18,000 in total interest.

Lender credit (no-closing-cost) — the lender covers your fees in exchange for a slightly higher rate. You pay nothing now but more each month. Best if you plan to sell or refinance again within 5 years.

⚠️

Always use the APR, not the rate, to compare offers. APR incorporates fees into a single annualized figure, making it the correct apples-to-apples comparison metric. A low rate with high fees can cost more than a slightly higher rate with low fees.

Complete closing costs breakdown → Refinance cost calculator →

5Credit Scores & Refinancing

Your credit score is one of the two biggest variables in your mortgage rate — the other being your LTV. The relationship is direct: a higher score means a lower rate, which means a lower payment and less total interest paid over the life of the loan.

Score Tiers and Rate Impact

Conventional pricing is structured in tiers. While exact thresholds vary by lender and change over time, the general pattern is:

760–850: Best available rates. Typically 0.25%–0.5% lower than borrowers at 680.
740–759: Excellent — very close to the top tier with most lenders.
700–739: Good. You qualify for competitive rates but may not get the absolute floor.
680–699: Fair. Rates are noticeably higher than top-tier. Worth spending a few months improving before applying.
660–679: Rates are materially higher. Consider whether improving your score first saves more than the monthly savings you'd get now.
620–659: Minimum conventional. Rates are significantly higher. FHA may offer better terms.
Below 620: Conventional refinance not available. FHA allows as low as 580; VA has no minimum.

Credit Score Impact of Refinancing

Applying for a refinance triggers a hard credit inquiry, which typically reduces your score by 5–10 points temporarily. The score usually recovers within 3–6 months as the new account ages. Rate shopping with multiple lenders within a 45-day window counts as a single inquiry under FICO scoring models — so get multiple quotes without worrying about multiple dings.

Tip: Pull your free credit report before applying. Dispute any errors — even a single incorrect late payment can cost you tens of thousands of dollars over the life of a 30-year loan if it pushes you into a lower rate tier.

Is now the right time to refinance? → How to compare lender offers →

6Cash-Out Refinancing

A cash-out refinance replaces your existing mortgage with a new, larger loan. The difference between the new loan amount and your current payoff balance is paid to you in cash at closing. It is one of the lowest-cost ways to borrow against your home equity because mortgage rates are typically well below personal loan or credit card rates.

How Much Can You Take Out?

The maximum cash-out is determined by your loan-to-value ratio. Conventional loans allow cash-out refinances up to 80% LTV. If your home is worth $500,000, the maximum new loan is $400,000. If your existing balance is $280,000, you could take out up to $120,000 — less closing costs. VA loans allow up to 90% LTV. FHA cash-out refinances are capped at 80% LTV.

Conventional max

80% LTV

VA max

90% LTV

FHA max

80% LTV

Texas (all types)

80% LTV

When It Makes Sense

Cash-out refinancing makes strong financial sense when the borrowed funds generate a return greater than the interest cost — home improvements that increase property value being the clearest example. It also makes sense for consolidating truly high-interest debt (20%+ APR credit cards) when the borrower has a plan to avoid re-accumulating that debt. It makes poor sense for depreciating purchases or discretionary spending.

Texas Cash-Out Rules

Texas has constitutional homestead protections that restrict cash-out refinancing in ways no other state does. On a primary residence, the maximum cash-out LTV is 80% (cannot be waived), there is a 12-month waiting period between cash-out refinances, and all lender fees are capped at 2% of the loan amount. See the state-by-state rules guide for full detail.

Cash-out refinance calculator → Cash-out guide →

7FHA Refinancing

FHA loans — insured by the Federal Housing Administration — have their own refinance options with distinct rules. The most important difference from conventional refinancing is the mortgage insurance premium (MIP), which affects the long-term cost of staying in an FHA loan.

FHA Streamline Refinance

The fastest and easiest refinance available. Designed for existing FHA borrowers who want a lower rate without the full underwriting process. Key features:

No new appraisal — the existing appraised value is used (protects underwater borrowers)
No income verification — the lender does not re-verify your income or employment
Credit check may still apply — most lenders still pull your credit
Net tangible benefit required — you must demonstrate a qualifying benefit (lower rate, lower payment, or switch from ARM to fixed)
Cannot take cash out — streamline is rate-and-term only

FHA Cash-Out Refinance

Standard cash-out refinancing is available on FHA loans up to 80% LTV. The full underwriting process applies, including a new appraisal and income verification. FHA MIP (upfront and annual) continues on the new loan.

FHA to Conventional: When to Make the Switch

FHA mortgage insurance premium (MIP) works differently than conventional PMI. For most FHA loans originated after June 2013, MIP is required for the life of the loan — it does not cancel at 80% LTV the way conventional PMI does. Once your LTV reaches 80% (either through payments or home appreciation), refinancing from FHA to a conventional loan eliminates MIP permanently and can produce significant monthly savings.

Upfront MIP

1.75%

Annual MIP

~0.55%/yr

Min score (FHA)

580

Cash-out max LTV

80%

PMI/MIP removal calculator → FHA refinance situations →

8VA Refinancing

VA loans — guaranteed by the Department of Veterans Affairs — are available to eligible active-duty servicemembers, veterans, and surviving spouses. They offer two distinct refinance paths, both with significant advantages over conventional programs.

VA IRRRL — Interest Rate Reduction Refinance Loan

The VA's streamline refinance is called the IRRRL (sometimes pronounced "Earl"). It is the fastest and lowest-cost VA refinance option:

Available only to existing VA loan holders
No new appraisal in most cases
No income or asset verification in most cases
Must result in a lower rate or more stable loan type (ARM → fixed)
VA funding fee: 0.5% of the loan amount (waived for veterans with service-connected disabilities)
Can be rolled into the loan — no out-of-pocket cost required

VA Cash-Out Refinance

VA cash-out refinances allow eligible borrowers to refinance up to 90% LTV — the highest cash-out LTV available on any government-backed loan. There is no PMI at any LTV on a VA loan. The VA funding fee on a cash-out refinance is 2.3% for first use (1.65% for subsequent use) for most borrowers. A new appraisal and full underwriting are required.

✅

No PMI ever on a VA loan. Unlike conventional and FHA loans, VA loans never require private mortgage insurance regardless of LTV. This alone can save hundreds of dollars per month for borrowers with less than 20% equity.

Who Qualifies

VA loan eligibility requires a valid Certificate of Eligibility (COE). You generally qualify if you served 90 consecutive days of active service during wartime, 181 days during peacetime, six years in the National Guard or Reserves, or are the surviving spouse of a servicemember who died in the line of duty.

See VA refinance examples →

9PMI Removal

Private mortgage insurance (PMI) is required on conventional loans when the LTV exceeds 80% at origination. It protects the lender — not you — and typically costs 0.5% to 1.5% of the loan balance per year, or $100–$300 per month on a $250,000 loan. Removing PMI is one of the most straightforward ways to lower your monthly payment.

Three Ways PMI Goes Away

1. Automatic cancellation by law (Homeowners Protection Act): The lender must cancel PMI when your loan balance reaches 78% of the original purchase price — by law, automatically, without you asking. This happens through normal amortization payments.

2. Request cancellation at 80% LTV: Once your balance reaches 80% of the original purchase price, you can request cancellation in writing. The lender may require a new appraisal to confirm value has not declined.

3. Refinancing: If your home has appreciated significantly, your current LTV may already be well below 80% even if you haven't paid down much principal. A refinance with a new appraisal establishes the current value — and if the new LTV is below 80%, the new conventional loan has no PMI at all.

FHA MIP vs. Conventional PMI

FHA loans carry mortgage insurance premium (MIP), not PMI, and the rules are different. For most FHA loans originated after June 3, 2013, MIP is required for the life of the loan regardless of LTV. The only way to eliminate FHA MIP is to refinance out of the FHA loan entirely — into a conventional loan with an LTV of 80% or below. Use the PMI removal calculator to estimate your current LTV, the date PMI cancels, and how much you'd save by refinancing now.

Typical PMI cost

0.5%–1.5%/yr

Auto-cancel LTV

78%

Request cancel LTV

80%

FHA MIP removal

Refi required

PMI removal calculator →

10State-Specific Rules

Federal guidelines — credit score minimums, LTV requirements, income verification standards — apply equally in all 50 states. But layered on top of those are state laws that can meaningfully change your closing costs, the process, and what you are allowed to do with your equity.

Mortgage Recording Taxes

Some states charge a tax every time a new mortgage is recorded in the public records. You pay this every time you refinance — not just at the original purchase. New York charges up to 2.8% on large loans in New York City. Florida charges 0.35% statewide. Maryland charges 0.1%–0.5% depending on county. Most states charge nothing. On a $600,000 refinance in New York City, the recording tax alone can exceed $14,000.

Attorney-Closing States

In 14 states plus Washington D.C., a licensed real estate attorney must supervise the closing. These include New York, Massachusetts, Georgia, New Jersey, Connecticut, and others. Attorney fees add $500–$1,500 to closing costs in these states and are non-negotiable.

Texas Cash-Out Restrictions

Texas imposes constitutional limits on cash-out refinances on primary residences: maximum 80% LTV (cannot be waived by any lender), a 12-month waiting period between cash-outs, and a 2% cap on all lender fees. These restrictions are unique in the country and apply even if you use a lender licensed elsewhere.

Community Property States

In the nine community property states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — a non-borrowing spouse may be required to sign loan documents even if they are not on the mortgage.

Full state-by-state rules guide →

11Refinance Calculators

Every topic in this guide has a free calculator to run the numbers for your specific situation. All calculators are free, browser-based, and require no account.

🏠 Mortgage Refinance Calculator

Enter your current loan and up to 3 new lender offers side by side. Compares monthly payments, total interest, break-even, and net savings.

⏱ Break-Even Calculator

How many months until your monthly savings repay the closing costs? Shows 5-year and 10-year net savings.

💰 Mortgage Savings Calculator

Lifetime interest saved, monthly payment reduction, and net savings after closing costs — with a full amortization comparison.

💵 Cash-Out Refinance Calculator

Net cash at closing, new LTV, new payment, break-even on closing costs, and maximum cash-out at 80% LTV.

📊 LTV Calculator

Current loan-to-value ratio, equity percentage, PMI status, and how much equity you need for a cash-out refinance.

🔓 PMI Removal Calculator

When does PMI cancel automatically? When can you request removal? How much do you save by refinancing to remove it now?

🧾 Refinance Cost Calculator

Itemized closing cost estimate, total cost to refinance, and how long it takes to recoup based on your monthly savings.

Start here: If you're not sure which calculator to use, the main mortgage refinance calculator lets you compare up to three lender quotes side by side and shows the complete picture — payment, savings, break-even, and total interest — in one place.

Frequently Asked Questions

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

A rate-and-term refinance only changes your interest rate, loan term, or both — the loan balance stays the same (or decreases if you bring cash to closing). A cash-out refinance increases your loan balance above the current payoff amount and pays you the difference in cash. Cash-out refinances typically have slightly higher rates and require more equity.

How many times can you refinance a mortgage?

There is no legal limit on how many times you can refinance. However, most loan programs require a seasoning period (typically 6 months) before you can refinance again. Texas limits cash-out refinances to once per 12-month period on a homestead property. Refinancing too frequently can also be costly — you restart the break-even clock every time you pay new closing costs.

Does refinancing restart your 30-year mortgage?

Only if you refinance into a new 30-year term. If you have 22 years left on your current mortgage and refinance into a new 30-year loan, you extend your payoff date by 8 years. You can avoid this by refinancing into a shorter term (20-year, 15-year) that aligns with your existing payoff date, or by making extra principal payments on the new loan. The savings calculator lets you compare any term combination.

Is it worth refinancing to save $100 per month?

It depends entirely on the closing costs and how long you plan to stay. $100/month × 12 = $1,200/year. If closing costs are $6,000, you break even after 5 years (60 months). If you plan to sell before then, refinancing costs you money. If you plan to stay 10+ years, you come out $6,000+ ahead. Use the break-even calculator to find your exact number.

Can you refinance with bad credit?

Refinancing with a credit score below 620 is difficult for conventional loans. FHA allows refinancing with scores as low as 580 (or 500 with 90% LTV or less). VA loans have no official minimum, but lenders typically require 620. An FHA streamline refinance for existing FHA borrowers has the most lenient credit requirements of any refinance product. If your score is below 620, spending 6–12 months improving it before applying can save you far more than the cost of waiting.