Common Refinance Myths (and What You Should Really Know)
Refinancing your mortgage can be a smart financial move — but it also comes with a lot of questions, hesitations, and more than a few myths. If you’ve heard things like “refinancing resets your loan” or “you can only do it once,” you’re not alone.
Let’s clear the air.
In this post, we’re breaking down some of the most common refinance myths we hear from homeowners — and explaining what’s actually true. If you’re on the fence about refinancing, this will give you a clearer picture of whether it’s the right time (and the right move) for you.
Myth #1: Refinancing Always Resets Your Loan to 30 Years
Not necessarily.
While a 30-year loan is a common refinance option, it’s not the only one. You can refinance into a 20-, 15-, or even 10-year mortgage depending on your financial goals and what you qualify for.
Many homeowners actually use refinancing to shorten their loan term, which can help them save money on interest over time. Others keep the same term but lower their interest rate or monthly payment.
Quick tip: Ask your licensed mortgage loan originator to run side-by-side scenarios so you can see how different terms impact your payment and long-term savings.
Myth #2: You Can Only Refinance Once
False.
There’s no limit to how many times you can refinance your mortgage — the key is whether it makes financial sense each time.
If interest rates have dropped again, your credit has improved, or your income has changed, it might be worth looking into a new refinance. Some people refinance to take cash out for home improvements or debt consolidation, while others want to get rid of mortgage insurance after building equity.
That said, refinancing does come with closing costs, so it’s important to weigh the upfront expense against your monthly or long-term savings.
Myth #3: You Need Perfect Credit to Refinance
Nope.
Just like when you bought your home, your credit score plays a role — but perfection isn’t required. In fact, there are several loan programs that work with mid-range credit scores, especially if you’ve built up some equity or have a strong payment history.
Your experienced lender can help you understand how your current credit profile impacts your refinance options and what rates you’re eligible for.
If your score isn’t where you want it to be yet, they can also offer advice to help you qualify down the road.
Myth #4: You Have to Refinance With Your Current Lender
Definitely not.
You’re free to shop around, and in most cases, you should. Even if your current lender offers you a deal, it never hurts to get a second opinion — especially when it could save you thousands.
Refinancing is essentially applying for a new loan to pay off your old one, so you can work with any lender or licensed mortgage loan originator you choose.
Quick tip: Compare not just the interest rate, but also the lender fees, closing costs, and how well they communicate. The lowest rate isn’t always the best deal if the service isn’t there.
Myth #5: Refinancing Is Too Expensive
It doesn’t have to be.
Yes, refinancing comes with closing costs — usually 2–5% of your loan amount — but that doesn’t mean it’s automatically “too expensive.”
In many cases, homeowners break even on those costs within a couple of years thanks to lower monthly payments or interest savings. And some lenders offer no-closing-cost refinance options, where costs are rolled into your loan or rate.
The key is understanding your break-even point — the time it takes for your monthly savings to outweigh the upfront costs.
Myth #6: You Should Only Refinance for a Lower Rate
Not always.
A lower rate is a common reason to refinance, but it’s not the only one. Some homeowners refinance to:
- Switch from an adjustable-rate mortgage (ARM) to a fixed rate
- Drop private mortgage insurance (PMI)
- Tap into equity for renovations or debt consolidation
- Pay off the loan faster with a shorter term
Sometimes, a refinance is more about changing your loan structure than chasing the lowest possible rate.
Myth #7: It’s Not Worth Refinancing Unless You Save at Least 1%
That old rule of thumb is outdated.
In the past, people would say you should only refinance if your new rate is at least 1% lower than your current one. But today’s loans and borrower goals are more flexible than that.
Even a 0.5% reduction could make a meaningful difference, depending on your loan size and how long you plan to stay in the home.
It’s less about the percentage, and more about your personal financial goals.
Final Thoughts: Refinancing Isn’t One-Size-Fits-All
If you’ve been holding off on refinancing because of something you “heard,” it might be time for a real conversation.
Working with an experienced lender can help you understand your options, do the math, and figure out whether a refinance could help you save money, reduce stress, or reach your financial goals faster.
There’s no pressure — just solid advice and answers you can actually use.
Thinking about refinancing? Our team of Mortgage Experts can help!