When should you refinance your mortgage

If mortgage rates fall, you may be able to save by securing a lower interest rate than you have on your existing loan. So how much should mortgage rates fall before you consider whether refinancing is worth it? The traditional rule of thumb says to refinance if your rate is 1% to 2% below your current rate.

At what point is it worth it to refinance?

A rule of thumb says that you'll benefit from refinancing if the new rate is at least 1% lower than the rate you have. More to the point, consider whether the monthly savings is enough to make a positive change in your life, or whether the overall savings over the life of the loan will benefit you substantially.

What is a good rule of thumb for refinancing?

How Does the Refinancing Rule of Thumb Work? The 1% refinancing rule of thumb says that you should consider refinancing your home when you can get an interest rate that is at least one percentage point lower than your current rate. The lower the new rate, the better.

Does refinancing hurt your credit?

Whenever you refinance a loan, your credit score will decline temporarily, not only because of the hard inquiry on your credit report, but also because you are taking on a new loan and haven't yet proven your ability to repay it.

How long should you wait to refinance a loan?

While mortgages can be refinanced immediately in certain cases, you typically must wait at least six months before seeking a cash-out refinance on your home, and refinancing some mortgages requires waiting as long as two years.