7 biggest myths about mortgage refinancing and what to know instead

In 2025, 87% of all mortgage borrowers paid above the most competitive rate available to them, and 78.7% of refinance borrowers overpaid, typically costing them $3,343 a year, or $278 a month, according to Bankrate's Hidden Homeownership Tax research.

Refinancing isn't free. Expect closing costs of 2% to 5% of your new loan amount, and the savings only outweigh that cost once you cross your break-even point.

While a lower interest rate sounds tempting, keep an eye on fees – they can overwhelm your savings from lower monthly payments.

Despite the rise in interest rates in the last few years, refinancing may still make sense for some homeowners. If you're a first-time refinancer, though, you might have a lot of questions about what the process is like — and might also have picked up some misinformation. Let's dispel some common myths about mortgage refinancing.

78.7% of refinance borrowers overpaid in 2025 because they didn't compare lenders

Compare at least three lenders before you sign

Closing costs run 2% to 5% of the loan amount

Run your break-even math before you commit

The loan term matters just as much — a lower rate on a reset term can cost more overall

Compare total cost over time, not just the monthly payment

A rate-and-term refinance doesn't touch equity or complicate a future sale — only a cash-out refinance taps equity, and it carries risk

If you need cash, compare a HELOC or home equity loan first

Lenders re-verify your credit and income on every refinance

Check your credit score and DTI before you apply

There's no legal limit, but fees and seasoning periods apply each time

Run the break-even math before refinancing again

You can reapply once you've fixed the specific reason for the denial

Identify your denial reason, fix it, then reapply

Myth 1: Shopping around for a refinance doesn't matter much

Not true, and it's the myth that costs borrowers the most. In 2025, 87% of all mortgage borrowers paid above the most competitive rate available to them, and refinance borrowers weren't far behind at 78.7%, according to Bankrate's Hidden Homeownership Tax research that analyzed 3.2 million mortgage originations. Typical borrowers who overpaid lost $3,343 a year, or $278 a month, by paying a rate that wasn't the best available to them.