Refinancing your mortgage can be a smart way to lower your monthly payments, reach financial goals faster, or tap into your home’s equity. But determining the best time to refinance your mortgage isn’t always straightforward. It depends on a mix of market conditions and your personal financial picture. Your timing is critical, and it can save you thousands—or cost you more than you expect. And it’s important to remember that what works for one homeowner may not work for another.
At Hancock Whitney, we help families make confident refinancing decisions every day. Our mortgage specialists understand that your home is one of your biggest investments, and we’re here to guide you toward decisions that support your long-term financial well-being.
Finding the right moment to refinance often starts with understanding the external factors that influence your rate and loan terms.
Interest Rates and the Economy: Interest rates fluctuate based on Federal Reserve policy, inflation, and overall economic conditions. When mortgage rates drop by at least 0.75% to 1% below your current rate, refinancing becomes worth exploring.
Your Home’s Current Value: If your home has appreciated since you bought it, you may be eligible for more favorable refinance terms. Appreciation can help you reduce—or even eliminate—private mortgage insurance (PMI), qualify for better rates, or access equity. If local home values have fallen, however, refinancing may be more challenging.
Your Credit Score: Your credit score has a major impact on the rate lenders offer. An improvement of 50 points or more since you closed on your current mortgage could unlock significantly better loan terms. Even smaller credit score gains can help.
If you're not sure how these factors affect your refinancing options, our Hancock Whitney mortgage specialists can walk you through your current scenario and what today’s market conditions mean for you.
Lowering your interest rate is one of the most common—and impactful—reasons to refinance. Even a 0.5% reduction can lead to meaningful long-term savings. For example, dropping from 5% to 4.5% on a $300,000 loan may save more than $50 per month and over $18,000 over the life of a 30-year loan.
The general rule of thumb suggests that refinancing makes sense when you can lower your rate by at least 0.75% to 1%, though this isn't absolute. You'll need to calculate your break-even point (how long it takes for your monthly savings to cover the closing costs of refinancing). If you plan to stay in your home beyond that point, refinancing likely makes financial sense.
Adjustable-rate mortgages (ARMs) often start with attractive introductory rates, but those rates can increase over time, making monthly payments less predictable. If you have an ARM and interest rates are rising—or are expected to rise—refinancing into a fixed-rate mortgage can provide long-term stability and help protect you from future payment increases.
This strategy may be particularly beneficial if you originally chose an ARM because you planned to move within a few years but have since decided to stay in your home longer. Refinancing from an ARM to a fixed-rate mortgage is often most valuable as you approach the end of your ARM’s initial fixed-rate period. Acting before your rate adjusts upward can help you lock in a predictable monthly payment and reduce uncertainty tied to changing market conditions.
Private mortgage insurance (PMI) typically applies when you purchase a home with less than a 20% down payment. This insurance protects the lender if you default on your loan, but it adds to your monthly payment without building equity. Once your home equity reaches 20%, you can refinance to eliminate PMI, potentially saving hundreds of dollars each month.
Rising home values can accelerate your path to the 20% equity threshold. If your property has appreciated in value since you purchased it, a new appraisal during the refinancing process may show that you already have enough equity to remove PMI, even if you haven’t paid down a significant portion of your loan balance.
Eliminating PMI through refinancing makes the most sense when it doesn’t require giving up a meaningfully lower interest rate on your existing mortgage. It’s important to weigh the monthly savings from removing PMI against any change in your interest rate and the closing costs associated with refinancing. A careful comparison can help determine whether refinancing delivers a net financial benefit.
A cash-out refinance lets you borrow against your home’s equity to fund things like home improvements, education, or debt consolidation. When used wisely—especially to replace higher-interest debt—it can simplify your finances and reduce your overall interest payments.
However, this type of refinance puts your home on the line, converting unsecured debt into mortgage debt. It’s important to use this tool strategically and avoid financing discretionary expenses with home equity.
Refinancing from a 30-year mortgage to a 15-year or 20-year term can save you tens of thousands of dollars in interest over the life of the loan. Shorter-term mortgages typically come with lower interest rates, and you'll build equity much faster by directing more of each payment toward principal rather than interest.
This approach is great for homeowners whose incomes have grown and who want to own their home outright before retirement—just make sure the higher monthly payment still fits comfortably within your budget.
If current interest rates are higher than the rate on your existing mortgage, refinancing typically doesn’t make financial sense. A higher rate means paying more in interest over time, which can significantly increase your total borrowing costs.
Even if refinancing could offer other benefits—such as accessing home equity or eliminating private mortgage insurance (PMI)—the added interest expense may outweigh those advantages. In higher-rate environments, alternatives like a home equity line of credit (HELOC) may provide access to equity without replacing your entire mortgage. You may also be able to remove PMI by working with your current lender once you reach 20% equity, without refinancing.
Refinancing late in your mortgage term often doesn't make financial sense because you've already paid most of the interest on your loan. Mortgage amortization front-loads interest payments, meaning your early payments go primarily toward interest, while later payments increasingly reduce your principal balance.
If you're within five to ten years of paying off your mortgage, refinancing can effectively restart the clock on interest payments. Even with a lower interest rate, extending your loan term may result in paying interest for many additional years—potentially offsetting any monthly payment savings.
Before deciding to refinance, compare the total interest you would pay over the remaining life of your current mortgage with the total cost of a new loan. In many cases, continuing with your existing mortgage—and making extra principal payments when possible—can be a more cost-effective strategy when you’re nearing the finish line. Our mortgage team can help you evaluate your specific situation and determine the most efficient path forward.
Refinancing typically comes with closing costs ranging from 2% to 6% of the loan amount. To make refinancing worthwhile, you need enough time to recover those costs through monthly savings. If you expect to sell your home within the next few years, you may not remain in the property long enough to reach your break-even point.
A simple way to evaluate this is to divide your total refinancing costs by your estimated monthly savings. If your break-even timeline extends beyond when you plan to sell, refinancing is more likely to increase your costs rather than reduce them. This is especially important for homeowners who may relocate for work, plan to upsize or downsize, or are considering a move to a different region.
While market conditions and personal circumstances can change, it’s best to base your decision on realistic expectations. If there’s a likely chance you’ll sell your home within the next two to three years, refinancing often isn’t worth the upfront investment.
Refinancing involves a hard credit inquiry that can temporarily lower your credit score by a few points. While the impact is usually modest and short-lived, it may affect your ability to qualify for favorable terms on other loans in the near term.
If you plan to finance a vehicle, apply for a business loan, or make another major credit-based purchase within the next six months to a year, the timing of a refinance deserves careful consideration. Multiple credit applications over a short period can compound the impact on your credit profile and make it harder to secure the best rates.
Refinancing also affects your debt-to-income ratio, which lenders use to evaluate new credit requests. Even if your monthly mortgage payment decreases, opening a new loan can influence approval decisions for other credit products.
The best time to refinance your mortgage is when market conditions favor you and your financial goals align with the benefits of a new loan. Refinancing can reduce your costs, create stability, unlock home equity, or help you reach milestones like retirement with greater ease.
If you're unsure whether now is the right moment, our Hancock Whitney mortgage team can:
Calculate your breakeven point
Review your equity and credit position
Provide current rate comparisons
Give honest recommendations based on how long you plan to stay in your home
And remember: If today isn’t the right time to refinance, conditions may improve later. Staying informed about rates and your financial situation ensures you’ll be ready when the time is right. You can also explore our mortgage refinance calculator to get a rough idea of what refinancing could do for you and your budget.
When you’re ready to find out whether refinancing makes sense for your family, our mortgage specialists are here to help with personalized guidance and straightforward answers.