What we verified in “Refinancing your mortgage: types, costs and break-even”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to VA, refinancing lets you replace your current loan with a new one under different terms.

   Sources 1 · Interest rate reduction refinance loan (updated January 7, 2026): 'Refinancing lets you replace your current loan with a new one under different terms' · Checked October 17, 2026

2. According to HUD Handbook 4000.1, a refinance uses the proceeds of a new mortgage to pay off existing debt or to withdraw equity; in a cash-out refinance the proceeds are not limited to specific purposes; in a no cash-out refinance the proceeds can only pay the existing debt and transaction costs; and a rate-and-term refinance is a no cash-out refinance in which all proceeds pay existing mortgage liens on the property and the costs.

   Sources 2 · Handbook 4000.1, II.A.8 Programs and Products - Refinances: 'A Refinance Transaction is used to pay off the existing debt or to withdraw equity from the Property with the proceeds of a new Mortgage'; 'A Cash-Out Refinance is a refinance of any Mortgage or a withdrawal of equity where no Mortgage currently exists, in which the mortgage proceeds are not limited to specific purposes'; 'limited to the purpose of extinguishing the existing debt and costs associated with the transaction'; 'Rate and Term refers to a no cash-out refinance of any Mortgage in which all proceeds are used to pay existing mortgage liens on the subject Property and costs associated with the transaction' · Checked October 17, 2026

3. According to HUD Handbook 4000.1, on an FHA cash-out refinance the maximum loan-to-value and combined loan-to-value are 80 percent of the Adjusted Value; a property with a mortgage must have at least six months of payments on the current loan; and a property owned free and clear can be refinanced as cash-out.

   Sources 2 · Handbook 4000.1, II.A.8, Cash-Out Refinances: 'must have a minimum of six months of Mortgage Payments on the current loan'; 'Properties owned free and clear may be refinanced as cash-out transactions'; 'The maximum LTV is 80 percent of the Adjusted Value'; 'The maximum CLTV is 80 percent of the Adjusted Value' · Checked October 17, 2026

4. According to HUD Handbook 4000.1, a streamline refinance is the refinance of an existing FHA-insured mortgage with limited credit documentation and underwriting; its proceeds must pay off an existing FHA-insured first mortgage; there are two options: credit qualifying, where the lender analyzes your credit and capacity but no appraisal is required, and non-credit qualifying, where the lender does not need to analyze credit or capacity or get an appraisal.

   Sources 2 · Handbook 4000.1, II.A.8: 'Streamline Refinance refers to the refinance of an existing FHA-insured Mortgage requiring limited Borrower credit documentation and underwriting'; 'There are two different streamline options available'; 'The Mortgagee must perform a credit and capacity analysis of the Borrower, but no appraisal is required'; 'The Mortgagee does not need to perform credit or capacity analysis or obtain an appraisal'; 'used to extinguish an existing FHA-insured first mortgage lien' · Checked October 17, 2026

5. According to HUD Handbook 4000.1, for an FHA streamline refinance, on the date the case number is assigned, at least six full months must have passed since the first payment due date of the mortgage being refinanced and at least 210 days since its closing date, and you must have made at least six payments.

   Sources 2 · Handbook 4000.1, II.A.8, Streamline Refinances, Mortgage Seasoning Requirements: 'On the date of the FHA case number assignment'; 'at least six full months must have passed since the first payment due date of the Mortgage that is being refinanced'; 'at least 210 Days must have passed from the Closing Date of the Mortgage that is being refinanced'; 'must have made at least six payments' · Checked October 17, 2026

6. According to HUD Handbook 4000.1, the lender must confirm that an FHA streamline refinance gives you a net tangible benefit: a lower combined rate (the interest rate plus the mortgage insurance premium rate), a change from an adjustable to a fixed rate, or a shorter term that results in a financial benefit; for example, going from fixed to fixed without shortening the term, the new combined rate must be at least 0.5 percentage points lower.

   Sources 2 · Handbook 4000.1, II.A.8, Net Tangible Benefit of Streamline Refinances: 'A Net Tangible Benefit is a reduced Combined Rate, a change from an ARM to a fixed rate Mortgage, and/or a reduced term that results in a financial benefit to the Borrower'; 'Combined Rate refers to the interest rate on the Mortgage plus the Mortgage Insurance Premium (MIP) rate'; 'The Mortgagee must determine that there is a net tangible benefit'; table: 'At least 0.5 percentage'; 'points below the prior' · Checked October 17, 2026

7. According to VA, you may be eligible for an interest rate reduction refinance loan (IRRRL) if you already have a VA-backed loan, are using the IRRRL to refinance that VA loan and can certify that you live or used to live in the home; it can lower your monthly payment with a lower rate or move you from an adjustable to a fixed rate; you get it from a private bank, mortgage company or credit union, not from VA, and terms and fees vary, so contact several lenders; you can include the costs in the new loan or take a rate high enough for the lender to pay them; and you may need to pay the VA funding fee.

   Sources 1 · Interest rate reduction refinance loan: 'You already have a VA-backed home loan'; 'You're using the IRRRL to refinance your existing VA-backed home loan'; 'You can certify that you currently live in or used to live in the home covered by the loan'; 'Lower your monthly mortgage payment by getting you a lower interest rate'; 'moving from a loan with an adjustable or variable interest rate'; 'You'll go through a private bank, mortgage company, or credit union'; 'not directly through us'; 'Terms and fees may vary, so contact several lenders to check out your options'; 'you can include these costs in the new loan so you don't have to pay up front'; 'at an interest rate high enough so your lender can pay the costs'; 'You may need to pay the VA funding fee' · Checked October 17, 2026

8. According to VA, keep closing costs in mind when refinancing because they can add up to thousands of dollars; before deciding, divide your closing costs by how much you expect to save every month to see if it is worth it; and while the lender can explain costs and benefits, you need to understand what you are getting into.

   Sources 1 · Interest rate reduction refinance loan: 'You'll want to keep closing costs in mind when refinancing a loan, as they can add up to thousands of dollars'; 'Before you decide to refinance, divide your closing costs by how much you expect to save every month by refinancing to see if it's worth it'; 'you'll want to be sure you understand what you're getting into' · Checked October 17, 2026

9. Under the law (38 U.S.C. §3709), VA guarantees a refinance only if the lender certifies the recoupment period and all fees and costs (other than taxes, escrow amounts and VA fees such as the funding fee) are recouped through lower monthly payments within 36 months of loan issuance; when both the old and new loans are fixed-rate, the new rate must be at least 50 basis points (0.5 percentage points) lower; and the loan being refinanced must have at least six consecutive monthly payments and 210 days since its first payment due date. These rules do not apply to a cash-out refinance in which the new loan is larger than the payoff of the old one.

   Sources 3 · 38 U.S.C. §3709(a) ('other than taxes, amounts held in escrow, and fees paid under this chapter'; 'all of the fees and incurred costs are scheduled to be recouped on or before the date that is 36 months after the date of loan issuance'; 'calculated through lower regular monthly payments'), (b)(2) ('not less than 50 basis points less than the previous loan'), (c) ('at least six consecutive monthly payments'; 'the date that is 210 days after the first payment due date') and (d)(1) ('is larger than the payoff amount of the refinanced loan') · Checked October 17, 2026

10. Under VA's regulation (38 CFR §36.4340(b)(2)), a VA streamline refinance is exempt from income verification only if you are not 30 days or more past due on the current loan; the principal balance does not go up except for fees VA allows; points and fees do not exceed 3 percent of the new loan; and the new rate is lower than the original, unless you are moving from an adjustable to a fixed rate.

    Sources 4 · 38 CFR §36.4340(b)(2)(i) ('The veteran is not 30 days or more past due on the prior existing residential mortgage loan'), (ii) ('would not increase the principal balance outstanding'), (iii) ('will not exceed 3 percent of the total new loan amount') and (iv) ('will be lower than the interest rate on the original loan, unless the borrower is refinancing from an adjustable rate to a fixed-rate loan') · Checked October 17, 2026

11. According to VA, a VA-backed cash-out refinance replaces your loan with a new one to take cash out of your home equity (to pay off debt, pay for school, make improvements or meet other needs) or to refinance a non-VA loan into a VA loan; you need a COE, must meet credit and income standards and must live in the home; lenders ask for pay stubs for the most recent 30 days and W-2s for the previous 2 years, many also for tax returns, and order an appraisal; you may pay the funding fee; and VA says to understand how the new loan amount relates to your home's value.

    Sources 5 · Cash-out refinance loan (updated January 7, 2026): 'If you want to take cash out of your home equity or refinance a non-VA loan into a VA-backed loan'; 'You'll live in the home you're refinancing with the loan'; 'pay off debt, pay for school, make home improvements, or take care of other needs'; 'Copies of paycheck stubs for the most recent 30-day period'; 'W-2 forms for the previous 2 years'; 'required by many, but not all lenders'; 'The lender will order a home appraisal'; 'You may need to pay a VA funding fee at closing'; 'Make sure you understand how your new loan amount relates to the value of your home' · Checked October 17, 2026

12. VA and the CFPB warned service members and Veterans with VA loans about unsolicited refinance offers that appear official and promise extremely low rates, thousands of dollars in cash back, skipped payments or no out-of-pocket costs; they say some lenders advertise a rate just to get you to respond, that the advertised rate may be for a 15-year or adjustable-rate loan or require discount points; that VA prohibits advertising skipped payments as a way to get cash in an IRRRL; that an escrow refund depends on what is left in the account at closing; that these advertised benefits are generally added to your loan and increase the balance; and that some push you to refinance a month or two after closing. To reduce offers, they list 888-5-OPTOUT (888-567-8688) and the National Do Not Call Registry (donotcall.gov).

    Sources 6 · VA and the Consumer Financial Protection Bureau warn against home loan refinancing offers that sound too good to be true (VA News, November 21, 2017): 'unsolicited offers to refinance your mortgage that appear official'; 'Extremely low interest rates'; 'Thousands of dollars in cash back'; 'Skipped mortgage payments'; 'No out-of-pocket costs'; 'Lenders may advertise a rate just to get you to respond'; 'the rates are for a 15-year fixed-rate mortgage or an adjustable-rate mortgage, or you may have to pay discount points'; 'VA prohibits a lender from advertising the skipping of payments as a means of obtaining cash'; 'dependent on how much is left in your account at the time the loan closes'; 'added to your loan and increase the overall principal balance'; 'only a month or two after you closed on your current VA loan'; '888-5-OPTOUT (888-567-8688)'; 'www.donotcall.gov' · Checked October 17, 2026

13. In that warning, VA says that if you have questions about your current VA loan you can call VA at (877) 827-3702, and that its loan specialists are available Monday through Friday, 8 a.m. to 6 p.m. Eastern.

    Sources 6 · VA News: 'VA loan specialists are available from 8 a.m. to 6 p.m. ET, Monday through Friday'; 'If you have questions about your current VA loan, contact VA at (877) 827-3702' · Checked October 17, 2026

14. According to the CFPB, every mortgage has origination services and costs, even if some are advertised with no lender fees or no closing costs; lenders do this by charging a higher rate in exchange for a credit, or by adding closing costs to the loan amount; a higher rate means paying more over time, and a larger loan increases your payments and reduces your equity.

    Sources 7 · Is there such a thing as a no-cost or no-closing cost loan or refinancing? (reviewed April 3, 2024): 'There are services rendered and costs related to originate all mortgages'; 'charging you a higher interest rate and giving you a credit'; 'adding the closing costs to your loan amount'; 'increase your payments and reduce your equity' · Checked October 17, 2026

15. According to the CFPB, a prepayment penalty is a fee some lenders charge if you pay off all or part of your mortgage early, which you would have agreed to at closing; not all mortgages have one; it typically applies if you pay off the whole balance, for example because you sell or refinance, within a specific number of years.

    Sources 8 · What is a prepayment penalty? (reviewed September 11, 2024): 'A prepayment penalty is a fee that some lenders charge if you pay off all or part of your mortgage early'; 'you would have agreed to this when you closed on your home'; 'Not all mortgages have a prepayment penalty'; 'because you sold your home or are refinancing your mortgage'; 'within a specific number of years' · Checked October 17, 2026

16. According to the CFPB, the Loan Estimate is a three-page form you receive after applying for a mortgage; the lender must provide it within three business days of receiving your application; it shows the estimated interest rate, monthly payment and total closing costs, and whether the loan has a prepayment penalty; and every lender uses the same standard form, which makes comparing easier.

    Sources 9 · What is a Loan Estimate? (reviewed August 9, 2024): 'a three-page form that you receive after applying for a mortgage'; 'within three business days of receiving your application'; 'the estimated interest rate, monthly payment'; 'total closing costs for the loan'; 'penalties for paying off the loan early'; 'All lenders are required to use the same standard Loan Estimate form' · Checked October 17, 2026

17. According to the CFPB, it is a good idea to request Loan Estimates from at least three different lenders and compare them; to ask each for the APR, which reflects the interest rate plus points and certain other charges; and, if you pay points, to make sure you actually get a lower rate in exchange.

    Sources 10 · How do I find the best loan available when I'm shopping for a home mortgage loan? (reviewed September 11, 2024): 'request loan estimates from at least three different lenders and compare them'; 'The APR tells you the yearly cost of the loan based on the interest rate as well as points, broker fees, and certain other charges'; 'make sure that you actually get a lower interest rate in exchange for the extra points you pay' · Checked October 17, 2026

18. According to the CFPB, a rate lock means your rate will not change between the offer and closing as long as you close within the time frame and your application does not change; rates can change daily; locks are typically for 30, 45 or 60 days; extending one can be expensive, and it may lock you out of a lower rate if rates fall; and page 1 of the Loan Estimate shows whether your rate is locked and for how long.

    Sources 11 · What's a lock-in or a rate lock on a mortgage? (reviewed May 2, 2023): 'your interest rate won't change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application'; 'Mortgage interest rates can change daily'; 'Rate locks are typically available for 30, 45, or 60 days'; 'It may be expensive to extend'; 'a rate lock may lock you out of a lower interest rate if rates fall'; 'Check at the top of page 1 of your Loan Estimate' · Checked October 17, 2026

19. According to the CFPB, if you have a home equity line of credit (HELOC), you may need approval from the HELOC lender to refinance your first mortgage; that lender can refuse, and then you may need to pay off the HELOC to refinance.

    Sources 12 · Does a HELOC affect my ability to refinance my first mortgage loan? (reviewed February 2, 2024): 'you may have to get approval from your HELOC lender in order to refinance your first mortgage loan'; 'HELOC lenders can refuse to allow you to refinance'; 'you may need to pay off the HELOC in order to refinance' · Checked October 17, 2026

20. According to the CFPB, for most non-purchase mortgages, such as refinances, you have the right of rescission: three business days to cancel after signing, counting Saturdays but not Sundays or legal public holidays; the clock starts once you have signed the promissory note, received the Truth in Lending disclosure (usually the Closing Disclosure) and received two copies of the notice of your right to rescind; you must notify the lender in writing, using its form or a letter, and calling or visiting is not enough; the money you paid must be returned within 20 calendar days after the lender receives your notice; if you did not get those documents or they had certain errors, you may have up to three years; and if you rescind the refinance, you still owe your original loan.

    Sources 13 · Can I change my mind after I sign the loan closing documents for my second mortgage or refinance? (reviewed August 8, 2024): 'You have the right to cancel, also known as the right of rescission, for most non-purchase money mortgages'; 'Refinances and home equity loans are examples of non-purchase money mortgages'; 'three business days to cancel'; 'business days include Saturdays, but not Sundays or legal public holidays'; 'You sign the credit contract (usually known as the Promissory Note)'; 'You receive two copies of a notice explaining your right to rescind'; 'You must notify your lender in writing'; 'You can't rescind just by calling or visiting the lender'; 'You may use the form provided to you by your lender or a letter'; 'Within 20 calendar days after your lender receives your notice of rescission'; 'you may have the right to cancel the loan for up to three years'; 'you will still have to pay the original loan' · Checked October 17, 2026

21. According to the CFPB, you do not have the right of rescission when the loan is used to buy or build your principal home, when you refinance or consolidate with the same creditor a loan already secured by your home and borrow no additional funds, or when a state agency is the creditor.

    Sources 14 · Are there situations where I would not have a right of rescission? (reviewed September 11, 2024): 'Your loan is used to purchase or build your principal home'; 'You consolidate or refinance with the same creditor a loan that is already secured by your home, and no additional funds are borrowed'; 'A state agency is the creditor for the loan' · Checked October 17, 2026

22. Under Regulation Z (12 CFR §1026.23), you may rescind until midnight of the third business day after closing, delivery of the notice or delivery of all material disclosures, whichever comes last; during that period the lender may not disburse money other than in escrow; and in a refinance with the same creditor, rescission applies to the part of the new amount that exceeds the unpaid balance.

    Sources 15 · 12 CFR §1026.23(a)(3)(i) ('until midnight of the third business day following consummation, delivery of the notice required by paragraph (b) of this section, or delivery of all material disclosures, whichever occurs last'), (c) ('no money shall be disbursed other than in escrow') and (f)(2) ('A refinancing or consolidation by the same creditor'; 'to the extent the new amount financed exceeds the unpaid principal balance') · Checked October 17, 2026

23. According to the CFPB, VA loans often offer low-cost, streamlined refinance options and additional protections if you later have trouble paying.

    Sources 16 · Special loan programs: 'Often offer low-cost, streamlined refinance options and additional protections if you have trouble paying your mortgage later on' · Checked October 17, 2026

24. HUD-approved housing counselors give independent advice on defaults, foreclosures and credit, often for free or at low cost.

    Sources 17 · Find a Housing Counselor: 'Housing counselors throughout the country can provide advice on buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'they can offer independent advice, often at little or no cost to you' · Checked October 17, 2026