When to Refinance: 5 Signs It's Time to Save Money (2026)

When to Refinance: 5 Signs It's Time to Save Money (2026)

Wondering when to refinance? If your mortgage interest rate is at least 1% higher than current rates, it might be time. Refinancing could save you an average of $1,000 annually, according to the Federal Reserve.

Refinancing matters because it can reduce your monthly payments, letting you keep more money in your pocket each month. Even a 1% reduction in your interest rate can save you thousands over the life of your loan.

Understanding When to Refinance

1. Interest Rates Have Dropped

If current interest rates are lower than what you're paying, refinancing can cut your monthly payments significantly. For example, dropping from a 5% to a 4% rate on a $200,000 loan could save you around $1,200 annually.

2. Your Credit Score Has Improved

A better credit score could qualify you for better rates. If your score has risen since you took out your mortgage, refinancing might be beneficial.

3. Your Home Value Has Increased

With increased home equity, you might ditch private mortgage insurance (PMI), saving you hundreds each year.

4. Your Financial Situation Has Changed

If your income has increased or debts have decreased, you might want to switch to a shorter loan term to save on interest.

5. You're Looking to Consolidate Debt

You can refinance to cash out equity for debt consolidation, potentially lowering your overall interest payments.

How to Refinance

1. Check Current Rates: Compare current interest rates to your existing rate.
2. Review Your Credit Score: Ensure your score supports a better rate.
3. Calculate Costs vs. Savings: Consider closing costs versus monthly savings.
4. Shop Lenders: Get quotes from multiple lenders to find the best deal.
5. Apply: Select your lender and submit your application.

You could spend an hour doing this manually — or let BON Credit do it in seconds, for free.Download →

Common Mistakes and Myths

Many think refinancing always lowers costs. Not true if fees outweigh savings. Others believe any rate drop justifies refinancing; however, factor in the break-even point.

FAQs

How often can I refinance my mortgage?

Technically, you can refinance as often as you like, but consider closing costs and the break-even point.

Can refinancing hurt my credit score?

Refinancing may cause a small temporary dip in your score due to credit inquiries, but it often rebounds quickly.

Is refinancing worth it for a small interest rate drop?

Depends on how long you plan to stay in your home. Use a break-even calculator to decide.

What's the best time of year to refinance?

Rates fluctuate, but late fall often sees lower rates as lenders try to meet end-of-year targets.

Refinancing can be complex, but BON Credit makes it easy. Download BON Credit now to monitor your situation and save without the headache.Try it free →