Many homeowners hesitate to refinance because of concerns about equity, savings, credit, or restarting their loan term. Some of those concerns are valid. Others are worth a second look once you compare the costs, potential monthly savings, and how long you expect to stay in the home. Below are some of the most common refinance objections and how to evaluate whether they should actually stop you from exploring your options.
Mortgage rates remain an important part of the refinance conversation. According to Freddie Mac, the average 30-year fixed-rate mortgage was 6.66% as of August 27, 2026, slightly up from 6.65% the prior week.
Here are some of the most common reasons homeowners balk at refinancing, and when those concerns may or may not be deal-breakers.
While it’s true that many homeowners were “underwater” for several years, real estate values have recovered nicely. Some we spoke to resisted refinancing because they were afraid their home wouldn’t appraise for a high enough figure, and they’d have to pay that dreaded, expensive mortgage insurance.
Mortgage insurance is a fee paid to an insurance company to protect the lender when the loan is more than 80% of the property’s value. The cost of this insurance depends on a combination of the loan-to-value ratio and the borrower’s credit score.
Mortgage insurance for a $400,000 loan that is 85% of the property’s value would cost about $67.00 per month for someone with a credit score of 740. To put that into perspective, dropping the rate on a $400,000 loan to 3.625% from 4.5% would cut the monthly payment by over $250 a month.
Even temporarily paying for the mortgage insurance, you’d still save about $187 every month from the refinance. Lenders typically allow a borrower to drop the mortgage insurance once the loan-to-value ratio reaches 80%. After that, you’ll save the full $250.
Let’s be honest. Refinancing is not what you could call “fun.” It does take some effort on the homeowner’s part—you have to gather pay stubs and other income documentation, you have to dig up your tax returns and go through the whole rigmarole of signing all those forms, some of them twice. No argument: it’s a hassle, just like mowing the lawn or doing the laundry is a hassle.
Let’s say you have a good rate today on your $400,000 loan, and you can drop your rate by just ½%. Is that a waste of time? You’d drop your payment by $140 a month, and you’d accrue net savings of $6,000 in five years. If it took you as many as 10 hours of real work to refinance (which it won’t,) is $6,000 over five years a good return on your time?
A refinance is usually easier to judge when you focus on a few practical questions instead of just the objection itself.
First, estimate your monthly savings or your payment change. Then compare that with your closing costs to understand your break-even point. If your savings would take too long to recover the upfront cost, or you expect to move before you reach that point, waiting may be reasonable.
Next, think about your timeline in the home and your main goal. If your priority is lowering monthly payments, extending the term may still serve a purpose even if it means paying interest over a longer period. If your goal is paying off the home faster, a shorter term or a slightly higher payment strategy may make more sense.
Finally, look at the full tradeoff: cash-flow relief today, total cost over time, and whether the refinance supports what you want the loan to do next. In other words, the right question is not just “Can I refinance?” but “Will this refinance improve my situation enough to justify the cost and effort?”
News Flash: You do NOT have to have perfect credit to get a mortgage today. It is true that lenders have certain guidelines that you have to meet in order to get them to lend you money. For example, Fannie Mae guidance uses a minimum representative credit score of 620 for eligibility—hardly a perfect credit record.
The mysterious FICO score that all lenders use ranges from 300 to 850. The formula that calculates that all-important scores takes into account late payments and collection accounts (or the absence thereof), credit card balances and legal information, such as judgments and liens that may appear. A credit report can contain a combination of all of these derogatory items and still produce a credit score above 620. News Flash: You do NOT have to have perfect credit to get a mortgage today.
What if your credit score is below that magical 620 number? If the reason for the lower score is high credit card balances, paying down those balances will raise your score quickly. If there are recent collection accounts or liens, dealing with those items will also raise your score. It may take some effort on your part, but you should decide whether the payoff (saving thousands of dollars) is worth the work.
Plenty of buyers balk at the idea of a refinance because they’ve been paying their mortgage for five years already, and don’t want to tack another five years onto the back of a refinance. However, refinancing doesn’t have to mean resetting the countdown timer!
The 30-year mortgage has been a mainstay of lenders and homeowners for generations; but if your dream is to own your home with no mortgage, there are ways to accomplish that. If you can handle a higher monthly payment, consider a 15-year loan.
The rate will be lower than for a 30-year mortgage, but you’ll be paying quite a lot more toward the principal each month. A $400,000 30-year loan at 3.5% will have a payment of $1,796. A 15-year loan for the same amount at 3% would have a $2,762 payment—$1,000 higher.
This higher payment is the result of retiring the principal in half the time. In the end you’ll pay much less total money, but you have to fork over more each month (although it’s less than double the 30-year payment).
If that higher payment doesn’t fit your budget, there is a middle ground. Some lenders are willing to create loans with terms of 26 or 27 years so you can get your home paid off on the same schedule. You can also increase the monthly payment on your new loan slightly to shorten the term. If you paid $2,000 instead of $1,796 on your $400,000 loan, you’ll pay it off in 25 years, not 30.
Please note: We have used loan amounts, rates and payments for instructional purposes only. Please do not consider these examples to be rate quotes or loan estimates.
If you are weighing a refinance, the most useful next step is to compare today’s rates, run the numbers on your potential savings, and look at how the new loan would fit your timeline and goals.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
A refinance may be harder to get if you do not meet a lender’s requirements for equity, credit, income, or other underwriting guidelines. Low equity can affect pricing and may require mortgage insurance, and weaker credit can also limit options. Even so, not having perfect credit or 20% equity does not automatically mean you cannot refinance.
Yes. A lender can deny a refinance if the loan does not meet its requirements for credit, equity, income, or other approval standards. Some borrowers who think they will be denied may still qualify once they review their credit, home value, and overall savings potential.
That depends on your rate, closing costs, monthly savings, and how long you expect to stay in the home. A refinance can make sense when it lowers your payment enough to recover the upfront cost within a reasonable time frame. It may also be useful if it better fits your goal, such as improving cash flow or paying off the loan faster.
Refinancing may not make sense if the savings are too small to outweigh the closing costs, or if you expect to move before you reach your break-even point. It can also be a weaker choice if the new loan does not support your goal for monthly payment, total interest, or payoff timeline.
Yes, in some cases. If your loan is more than 80% of the home’s value, you may have to pay mortgage insurance. Even with that added cost, refinancing can still be worthwhile if the rate reduction creates meaningful monthly savings.
The article notes that Fannie Mae guidance uses a minimum representative credit score of 620 for eligibility. That means perfect credit is not required. If your score is lower because of high card balances or recent negative items, improving those issues may help raise your score and expand your refinance options.
No. Refinancing does not have to mean starting over with a new 30-year term. Borrowers may choose a shorter loan, such as a 15-year mortgage, or in some cases a custom term like 26 or 27 years to stay closer to their original payoff schedule.
A small rate drop can still be worthwhile if it creates enough monthly savings and you plan to stay in the home long enough to recover the closing costs. The article’s example shows that even a half-point reduction can add up to substantial savings over several years.
Start by estimating your monthly savings or payment change. Then compare that number with your closing costs to see how long it would take for the savings to offset the upfront expense. If you expect to stay in the home longer than that break-even period, the refinance may be more attractive.
Possibly, but timing matters. If you plan to move before your monthly savings repay the closing costs, refinancing may not be worth it. The decision is usually strongest when your expected time in the home exceeds the break-even point.
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