When to Refinance Mortgage: Save as Much as $2,500 in 2026
When to Refinance Mortgage: Save as Much as $2,500 in 2026
Knowing when to refinance your mortgage can save you significant money over the life of your loan. Typically, refinancing makes sense when you can lower your interest rate by at least 1%, reduce the loan term, or switch from an adjustable to a fixed rate. According to Freddie Mac, borrowers who refinanced in 2021 saved over $2,500 annually on average.
Why This Matters
Refinancing at the right time can cut your monthly payments or reduce the overall interest you pay, freeing up cash for other expenses. For example, lowering your interest rate by just 1% on a $250,000 mortgage can save you about $2,500 per year. That’s money you could use elsewhere, like paying down other debt or building savings.
Understanding When to Refinance Your Mortgage
Interest Rates Have Dropped
Refinancing is often beneficial when current mortgage rates are lower than your existing rate. This can lower your monthly payment and the amount of interest you'll pay over time.
Your Credit Score Has Improved
A better credit score may qualify you for lower rates. If your score has jumped significantly since you got your mortgage, it's worth checking current rates.
Switching Loan Types
If you initially chose an adjustable-rate mortgage (ARM) but now want the predictability of a fixed-rate mortgage, refinancing could be the answer.
Shorten Your Loan Term
Switching from a 30-year to a 15-year mortgage can save you money on interest and help you build equity faster.
Steps to Refinance Your Mortgage
- Check your current mortgage balance and interest rate.
- Research and compare current refinance rates online.
- Calculate potential savings using a refinance calculator.
- Apply for refinance with a lender offering the best rate.
- Close on your new loan and start saving.
You could spend an hour doing this manually — or let BON Credit do it in seconds, for free.Download →
Common Mistakes or Myths
Refinancing Costs Are Too High
While refinancing does involve closing costs, the long-term savings can outweigh these initial expenses. Be sure to calculate your break-even point.
You Can Only Refinance Once
This is a myth. You can refinance multiple times, as long as it makes financial sense each time.
It Always Extends Your Loan Term
Refinancing doesn't have to mean starting over with a 30-year term. You can choose shorter terms to save on interest.
FAQs
How often can I refinance my mortgage?
Technically, there's no limit. However, ensure it makes financial sense each time.
What credit score is needed for refinancing?
Most lenders prefer a score of 620 or higher, but a better score can secure better rates.
Is it worth refinancing for 0.5%?
It depends on your loan size and how long you plan to stay in your home. Calculate potential savings to decide.
Don't leave potential savings on the table. Let BON Credit monitor mortgage rates and guide your decisions for free.Start now →
- Refinance when rates fall at least 1% below your current rate.
- Improved credit scores may qualify you for better rates.
- Consider refinancing to shorten your loan term and save on interest.
- Let BON Credit automate your savings — download for free.