My brother refinanced his mortgage in 2024 because a lender told him he’d “save $200 a month.” What the lender didn’t emphasize was $7,400 in closing costs and resetting his 30-year clock back to zero. After doing the math, his “savings” didn’t break even for 37 months, and the total interest over the life of the new loan was actually $28,000 more than staying put. He refinanced to save money and ended up paying more.
That’s why refinancing questions to ask your lender matter so much. Refinancing can be a smart financial move, but only when the numbers actually work. Too many homeowners focus on the lower monthly payment without examining the full picture: closing costs, loan term, break-even timeline, and total interest paid. These 14 questions give you everything you need to evaluate whether refinancing is genuinely worth it or just a good sales pitch.
Before You Contact a Lender
Prep work turns a confusing refinancing conversation into a productive one where you can evaluate the offer critically.
- Know your current loan details. Pull out your mortgage statement and note your current interest rate, remaining balance, remaining term, monthly payment (PITI), and whether you have PMI. These are the baseline numbers for comparison.
- Check your credit score. Your score directly affects the rate you’ll be offered. Pull your free reports at AnnualCreditReport.com and check your score through your bank or credit card provider. Above 740 gets you the best rates.
- Estimate your home’s current value. Check Zillow, Redfin, or a recent comparable sales analysis. Your loan-to-value ratio (LTV) determines whether you qualify and whether you’ll pay PMI on the new loan.
- Define your goal. Are you refinancing to lower your monthly payment, shorten your term, eliminate PMI, switch from an ARM to a fixed rate, or pull out cash? Each goal changes which questions matter most.
- Gather documentation. Lenders will need recent pay stubs, W-2s, tax returns, bank statements, and your current mortgage statement. Having these ready speeds up the process by weeks.
Rate and Term Basics
1. What interest rate and APR can I qualify for right now?
Your quoted interest rate and APR aren’t the same number, and comparing both matters. The interest rate is the cost of borrowing. The APR includes the rate plus lender fees, giving you the true cost of the loan.
In early 2026, 30-year fixed rates are running roughly 6.0% to 7.0% for well-qualified borrowers. If your current rate is 7.5% and you can refinance to 6.5%, that’s a meaningful drop. But if the rate difference is only 0.25% to 0.50%, closing costs may eat up any savings. Get the exact numbers for your situation, not national averages.
2. What is my break-even point, and does refinancing make sense for how long I plan to stay?
This is the most important question in the entire refinancing decision. Your break-even point is the number of months it takes for your monthly savings to cover the closing costs.
The formula: closing costs divided by monthly savings equals months to break even. If closing costs are $6,000 and you save $200/month, your break-even is 30 months. If you plan to sell or move before 30 months, refinancing costs you money instead of saving it.
Ask the lender to calculate this explicitly. Then add a cushion. If break-even is 28 months and you think you’ll stay 30 months, that’s cutting it too close. You want at least 12 to 24 months of clear savings beyond break-even to justify the hassle.
3. Should I refinance to a shorter term, keep the same term, or restart a 30-year loan?
This question dramatically affects your total cost. Here’s the trade-off:
Shorter term (15 or 20 years): Higher monthly payment, lower interest rate (typically 0.5% to 0.75% less), and massively less total interest. A 15-year loan at 5.75% on $300,000 costs about $140,000 in total interest. A 30-year loan at 6.25% on the same amount costs about $365,000 in total interest.
Same remaining term: If you have 22 years left, refinancing into a new 22-year loan (or the closest standard term) preserves your payoff timeline while capturing the rate savings.
Restarting to 30 years: Lowers your monthly payment the most but adds years of payments and potentially hundreds of thousands in additional interest. This only makes sense if you desperately need cash flow relief.
Ask the lender to show you all three scenarios with total interest calculations. Monthly payment alone doesn’t tell the story.
Closing Costs and Fees
4. What are the total closing costs for refinancing?
Refinancing closing costs typically run 2% to 5% of the new loan amount. On a $300,000 refinance, expect $6,000 to $15,000.
Common costs include: lender origination fee (0.5% to 1.0%), appraisal fee ($350 to $600), title search and insurance ($1,000 to $3,000), recording fees ($100 to $300), and various smaller charges. Ask for a complete Loan Estimate within three business days of your application and compare it to your current terms.
Some costs are negotiable. The origination fee has the most room for negotiation. Title insurance can sometimes be discounted if you use the same company from your original purchase (called a “reissue rate”).
5. Can I roll the closing costs into the loan, and should I?
Yes, most lenders allow you to roll closing costs into the new loan amount. This means zero out-of-pocket cost at closing.
Here’s the catch: you’re now paying interest on those closing costs for the life of the loan. Rolling $8,000 into a 30-year loan at 6.5% adds about $18,200 in total cost over the loan’s lifetime. Paying closing costs upfront is almost always cheaper in the long run, but rolling them in makes sense if you’re cash-strapped and the refinance still produces clear net savings.
There’s also a “no-closing-cost refinance” option where the lender covers your costs in exchange for a higher interest rate (typically 0.125% to 0.375% higher). Run the numbers: sometimes the slightly higher rate over 10+ years costs less than the lump-sum closing costs. Sometimes it costs more.
6. Is there a prepayment penalty on my current loan?
Before refinancing, check your existing mortgage for prepayment penalties. These are fees charged for paying off your loan early (which is what refinancing does). Most conventional and government-backed loans originated after 2014 don’t have prepayment penalties, but older loans and some non-bank mortgages might.
If your current loan has a prepayment penalty, factor that cost into your break-even calculation. A $5,000 penalty on top of $7,000 in closing costs changes the math significantly.
Specific Refinance Scenarios
7. Does it make sense to switch from an ARM to a fixed-rate mortgage?
If you have an adjustable-rate mortgage approaching its first adjustment (or already adjusting), refinancing to a fixed rate locks in predictability. This is especially valuable when rates are volatile or trending upward.
The question is whether you can get a fixed rate close to (or lower than) your current ARM rate. If your ARM is at 5.5% and the fixed rate is 6.5%, you need to weigh the cost of that 1% premium against the risk of your ARM adjusting even higher. Ask your lender to compare your ARM’s worst-case adjustment scenario against the fixed-rate option.
Also check the terms of your ARM: how often does it adjust? What’s the maximum rate cap? What index is it tied to? These details determine how much risk you’re actually carrying by staying with the ARM.
8. Should I consider a cash-out refinance, and what are the risks?
A cash-out refinance lets you borrow more than you owe and pocket the difference. If you owe $200,000 on a home worth $400,000, you could refinance for $280,000 and receive $80,000 in cash (minus closing costs).
Common uses include home improvements, debt consolidation, and major expenses. The interest rate is usually slightly higher than a standard refinance (0.125% to 0.5% more), and you’re increasing your debt on a secured asset.
The biggest risk: you’re converting unsecured debt (credit cards, personal loans) into debt secured by your home. If you can’t pay, you lose the house. Cash-out refinancing for home improvements that increase property value can make sense. Cash-out refinancing to pay off credit card debt you’ll run up again is a trap.
Ask the lender to show you the total cost of the cash-out amount over the life of the loan. That $80,000 at 6.5% over 30 years costs roughly $182,000 in total. That’s an expensive way to access your equity.
9. Can I use refinancing to drop my PMI?
If your original loan required private mortgage insurance because you put less than 20% down, refinancing can eliminate it once you’ve built sufficient equity.
You’ll need at least 20% equity (loan-to-value of 80% or less) based on a new appraisal. PMI costs 0.5% to 1.5% of your loan balance annually, so eliminating it on a $300,000 loan saves $1,500 to $4,500 per year.
But check this first: you may be able to drop PMI on your existing loan without refinancing. Once you reach 20% equity, you can request PMI removal from your current lender. At 22% equity, it should drop automatically for conventional loans. If you can drop PMI without refinancing, you avoid closing costs entirely. Only refinance to drop PMI if you’re also getting a meaningful rate improvement.
Process and Timeline
10. How long will the refinancing process take?
Most refinances close in 30 to 45 days, though some lenders can do it in as little as 21 days and others take 60+. During this period, you’ll need to provide documentation, get an appraisal, and go through underwriting.
Your current lender may offer a “streamline refinance” (for FHA, VA, or USDA loans) with less paperwork and no appraisal requirement. These close faster and cost less. If you have a government-backed loan, ask about streamline options before pursuing a full refinance.
Ask the lender for a specific timeline with milestones, and get their commitment on the closing date. Delays can cause rate lock expirations, which either cost you money or force you to relock at a potentially worse rate.
11. Can I lock my interest rate, and what are the terms?
Rate locks work the same as in a purchase mortgage. You’re freezing your quoted rate for a set period (typically 30 to 60 days) while the refinance is processed.
Key questions: Is the lock free? (It should be for standard periods.) What happens if closing is delayed past the lock window? Is there a float-down provision that lets you benefit if rates drop? Extension fees typically run 0.125% to 0.375% of the loan amount per week.
Lock early if rates are rising or volatile. Ask about the float-down option if rates are falling or unstable. Either way, get the lock terms in writing before committing.
Long-Term Impact
12. What is the total interest I’ll pay over the life of the new loan versus my current loan?
This is the number that reveals whether refinancing truly saves you money. A lower monthly payment means nothing if you’re paying $50,000 more in total interest over a longer term.
Ask the lender to calculate: total interest remaining on your current loan at current terms versus total interest on the proposed new loan (including the closing costs). If the new loan’s total interest plus closing costs exceeds the current loan’s remaining interest, the refinance isn’t saving you money. It’s just rearranging it.
This calculation is especially critical when you’re resetting the clock. If you have 22 years remaining on your current mortgage and you refinance into a new 30-year loan, you’ve added 8 years of payments. The monthly payment drops, but the total cost often skyrockets.
13. How will refinancing affect my tax situation?
Mortgage interest is tax-deductible if you itemize. Refinancing can change this in several ways. If your rate drops significantly, your deductible interest decreases. If you do a cash-out refinance, the interest on the cashed-out portion is only deductible if the funds are used for home improvements (post-2017 tax law).
Points paid on a refinance are deductible but must be amortized over the life of the loan (unlike purchase points, which are often fully deductible in the year paid). If you refinance again before the new loan’s term expires, you can deduct the remaining unamortized points from the previous refinance.
Consult your CPA or tax advisor before refinancing to understand how it specifically affects your return.
14. Should I shop multiple lenders, and how many quotes should I get?
Absolutely. The CFPB recommends getting at least three to five quotes, and the data backs this up. Borrowers who compare multiple lenders save an average of $3,000 over the life of the loan.
Multiple mortgage inquiries within a 14- to 45-day window count as a single inquiry on your credit report, so there’s no penalty for shopping. Get quotes from your current lender (they may offer loyalty pricing or reduced costs), a local bank or credit union, and at least one online lender. Compare using the Loan Estimate form, which standardizes fees and makes apples-to-apples comparison straightforward.
Your current lender has one advantage: they may waive the appraisal or offer a streamlined process since they already hold your loan. But don’t assume their rate is the best. It often isn’t.
What to Mention or Send Beforehand
Share these with the lender before your refinance conversation to get accurate quotes and speed up the process.
- Your current mortgage statement. Shows your remaining balance, interest rate, monthly payment, and servicer information. This is the baseline for evaluating any refinance offer.
- Your home’s estimated current value. Use Zillow’s Zestimate, a recent appraisal, or comparable sales data. Your LTV ratio affects the rate you qualify for and whether you’ll pay PMI.
- Your credit score and report. Knowing your score before the conversation helps you evaluate whether the quoted rate is competitive for your credit tier.
- Your refinancing goal. Tell the lender exactly what you’re trying to achieve (lower payment, shorter term, eliminate PMI, cash out equity). This prevents them from pushing a product that doesn’t align with your needs.
- Documentation package. Two recent pay stubs, two years of W-2s, two years of tax returns, 60 days of bank statements, and government ID. Having these ready can shave a week or more off the timeline. An expanding file folder keeps everything organized and easy to hand over when the lender asks.
Typical Cost Range and Factors
Refinancing costs depend on your loan amount, location, and the specific lender. Here’s what to expect in 2026.
Total Closing Costs: 2% to 5% of the new loan amount. On a $300,000 refinance: $6,000 to $15,000.
Origination Fee: 0.5% to 1.0% of the loan ($1,500 to $3,000 on a $300,000 loan). This is the most negotiable cost.
Appraisal Fee: $350 to $600 for a standard single-family home. Some streamline refinances waive the appraisal entirely.
Title Search and Insurance: $1,000 to $3,000. Ask about reissue rates if you’re using the same title company from your original purchase.
Recording Fees: $100 to $300, set by your local government.
Credit Report Fee: $25 to $75 per borrower.
Potential Monthly Savings: Depends entirely on the rate drop and term. A 1% rate reduction on a $300,000, 30-year loan saves approximately $200/month. A 0.5% reduction saves approximately $95/month.
Break-Even Timeline: Divide closing costs by monthly savings. At $6,000 in costs and $200/month savings, break-even is 30 months. At $8,000 in costs and $95/month savings, break-even is 84 months (7 years).
Cash-Out Premium: Cash-out refinance rates are typically 0.125% to 0.5% higher than rate-and-term refinance rates for the same borrower profile.
Red Flags vs. Green Flags
| Red Flag | Green Flag |
|---|---|
| They focus only on the monthly payment. A lower payment means nothing if the total cost is higher. Always ask about total interest over the life of the loan. | They show you total cost, not just monthly savings. A complete comparison includes monthly payment, total interest, closing costs, and break-even timeline. |
| They push a 30-year reset without discussing alternatives. Restarting the clock adds years of payments and often increases total interest. | They present multiple term options and explain the total cost difference between a 15-year, 20-year, and 30-year refinance. |
| They downplay closing costs. “It’s only $6,000” is a lot of money. Rolling it into the loan doesn’t make it disappear. | They break down every closing cost and help you calculate whether the total refinance cost is worth the savings. |
| They pressure you to cash out. Cash-out refinancing increases your debt on a secured asset. It should be a calculated decision, not an impulse. | They explain cash-out risks clearly and only recommend it when the use of funds makes financial sense (home improvement, high-interest debt consolidation with a plan). |
| They say “don’t bother getting other quotes.” A lender who discourages comparison shopping isn’t confident in their offer. | They encourage you to compare and are willing to compete on rate and fees. |
| They can’t calculate the break-even point. If the lender can’t tell you when you start saving money, they don’t understand their own product. | They calculate break-even clearly and advise against refinancing if the timeline doesn’t make sense for your situation. |
Money-Saving Tips
- Get at least three to five lender quotes. Rate and fee differences between lenders can save you $3,000 to $10,000 over the life of the loan. Mix your current servicer, a credit union, a bank, and an online lender.
- Negotiate the origination fee. If Lender A charges 1.0% and Lender B charges 0.5%, tell Lender A. Many will match or reduce their fee to keep your business.
- Ask about streamline refinance options. If you have an FHA, VA, or USDA loan, streamline programs offer reduced documentation, no appraisal, and lower closing costs. FHA streamline refinances can save $2,000 to $4,000 in fees compared to a full refinance.
- Check the reissue rate on title insurance. If you use the same title company from your original purchase, you may qualify for a 30% to 60% discount on the title insurance premium.
- Consider a shorter loan term. A 15-year loan at a lower rate saves enormous interest. If you have 25 years left on your current 30-year loan, refinancing to a 15-year loan might increase your monthly payment by $300 but save you $100,000+ in total interest.
- Don’t restart the 30-year clock unless you need the cash flow relief. If you can afford the higher payment, match your new loan term to your remaining term or go shorter. You’ll pay less total interest.
- Improve your credit score before applying. Even a 20-point increase can move you into a better rate tier. Pay down credit card balances, avoid new inquiries, and correct any report errors.
- Time your rate lock carefully. In a declining rate environment, waiting a week or two can save money. In a rising rate environment, lock immediately. Ask about float-down provisions.
Quick Reference Checklist
Rate and Term
- What interest rate and APR do I qualify for?
- What is my break-even point?
- Which term (15, 20, 30 years) produces the best total cost?
Closing Costs
- Total closing costs estimated?
- Roll into loan versus pay upfront comparison done?
- Prepayment penalty on current loan checked?
Specific Scenarios
- ARM-to-fixed conversion evaluated (if applicable)?
- Cash-out risks and total cost understood (if applicable)?
- PMI elimination options explored (refinance versus request removal)?
Process
- Timeline and milestones confirmed?
- Rate lock terms and float-down options understood?
Long-Term Impact
- Total interest comparison (old loan versus new loan) calculated?
- Tax implications reviewed with CPA?
- Multiple lender quotes compared?
Glossary
Break-Even Point: The number of months it takes for your monthly refinance savings to recoup the closing costs. Calculated by dividing total closing costs by monthly payment savings. If you move or refinance again before reaching break-even, you lose money on the refinance.
Loan-to-Value Ratio (LTV): Your remaining loan balance divided by your home’s current appraised value, expressed as a percentage. An LTV of 80% or lower typically qualifies you for the best rates and eliminates the need for PMI. A $240,000 balance on a $300,000 home equals 80% LTV.
Cash-Out Refinance: A refinance where you borrow more than your current balance and receive the difference as cash. The new loan amount is higher than the old one, and rates are typically slightly higher than a standard (rate-and-term) refinance.
Streamline Refinance: A simplified refinance program available for government-backed loans (FHA, VA, USDA) that reduces paperwork requirements and may waive the appraisal. Streamline refinances typically close faster and cost less than full refinances.
Rate Lock: An agreement with your lender that freezes your quoted interest rate for a set period (usually 30 to 60 days) while your refinance is processed. Protects you from rate increases during that window.
Float-Down Option: A feature of some rate locks that allows you to benefit from a rate decrease if market rates drop after you’ve locked. Usually requires a minimum decrease (often 0.25% or more) to trigger.
Helpful Tools and Resources
Refinancing requires the same mountain of paperwork as your original mortgage. A tabbed organizer makes it easy to compare Loan Estimates and keep track of every document.
Run your own break-even calculations and total interest comparisons. A financial calculator lets you verify every number the lender presents.
- CFPB Refinance Guide - The Consumer Financial Protection Bureau’s guide to understanding when refinancing makes sense, with rate comparison tools and worksheets.
- Freddie Mac Refinance Calculator - Estimate your potential savings and break-even timeline with Freddie Mac’s free refinance calculator.
- AnnualCreditReport.com - Pull your free credit reports before applying to identify and fix any errors that could affect your rate.
- Bankrate Refinance Calculator - Compare your current loan terms against refinance options with detailed break-even analysis and total cost comparisons.
Frequently Asked Questions
How much lower does the rate need to be to make refinancing worth it?
The old “1% rule” (refinance when you can drop 1%) is outdated. A better approach is calculating the break-even point. If closing costs are $6,000 and you save $150/month, you break even in 40 months. If you’ll stay at least 5 to 7 years beyond that, even a 0.5% rate drop can be worthwhile. The key is total cost savings, not rate differential alone.
Can I refinance with bad credit?
Yes, but your options are limited and rates will be higher. FHA streamline refinances may not require a credit check if you’re current on your existing FHA loan. Conventional refinances typically require a minimum 620 score, with 740+ for the best rates. If your score is below 620, consider spending 6 to 12 months improving it before applying.
How soon after buying can I refinance?
There’s no universal rule, but most lenders require at least 6 months of payment history before allowing a refinance. FHA streamline refinances require at least 6 monthly payments and 210 days from the first payment. The practical question is whether enough has changed (rates dropped, home value increased, credit improved) to justify the closing costs.
Will I need a new appraisal?
For most conventional refinances, yes. The appraisal typically costs $350 to $600. FHA, VA, and USDA streamline refinances often waive the appraisal requirement, which saves money and eliminates the risk of a low appraisal derailing your refinance.
Is it worth refinancing if I plan to sell in 3 to 5 years?
Run the break-even calculation. If closing costs are $7,000 and monthly savings are $200, you break even in 35 months (about 3 years). If you sell at the 5-year mark, you’ll have recouped the costs plus 24 months of net savings ($4,800). That’s worth it. If break-even is 48 months and you sell at 36, you lose $2,400. Always run the math against your specific timeline.
Disclaimer: This article is for educational purposes only and does not constitute financial or mortgage advice. Refinancing terms, rates, and costs vary based on individual circumstances, credit profile, and market conditions. Consult with a qualified mortgage professional or financial advisor before refinancing. Information reflects general guidance as of early 2026 and may change.