Want to refinance your mortgage before the end of 2025? Several personal and housing market factors should be considered when determining whether the end of the year is the best time to refinance.

Dig deeper into whether now is a good time to refinance your mortgage.

In October, the Federal Reserve cut interest rates by 25 basis points for the second time in 2025. And another reduction in December is not out of the question. So, should you wait to refinance your mortgage?

“We advise that if you have an opportunity to save through refinance, take advantage of it rather than attempting to time the market,” Erik Schmitt, consumer direct executive at Chase Home Lending, said in an email interview.

His rule? If rates drop by 75 basis points, refinancing often makes sense. However, smaller drops could make sense — especially for those with mortgages in the 7% range from 2023. Data from Freddie Mac puts current rates on a 30-year fixed-rate mortgage in the low-to-mid-6% range.

Let’s say you took out a $400,000 30-year fixed-rate mortgage at 7.25%. Your monthly principal and interest payment is probably around $2,729.

Now that you’ve owned the home for a couple of years, your outstanding balance is $395,000. If you refinance into another 30-year fixed-rate mortgage with a 6.5% rate, your payment could decrease to around $2,497 — saving $232 per month and over $40,000 in interest over the life of your loan.

Translation? Compare today’s mortgage rates to your current rate and run the numbers. If a refi will save you money without straining your budget, it could be time to act.

When it comes to timing, the amount of time you plan to stay in the home matters too. If the cost of refinancing your mortgage is $5,000 after closing costs, and you save $232 per month, it will take approximately 21 months to break even. If you plan to move in less than 21 months, refinancing probably wouldn’t make sense right now.

To get a sense of how refinancing into a different rate, term length, and loan balance would affect your balance, use the Yahoo Finance mortgage calculator below.

Learn when it makes sense to refinance your mortgage.

Once you’ve decided that refinancing is a solid money-saving move, here’s the next question: What kind of loan should you refinance into? Experts agree there’s no one-size-fits-all answer, though they do have thoughts on which choices make sense for specific financial situations.

“For those who don’t plan on being in their home very long and [are] looking to take advantage of the lower interest rate environment, refinancing into an adjustable-rate mortgage (ARM) could be advantageous,” said Schmitt.

With an ARM, your interest rate typically starts lower than it would with a fixed-rate mortgage. Then, your rate fluctuates based on market rates. Therefore, if local interest rates drop in the next few years, the rate on your ARM may also decrease. This translates to instant savings with the lower rate for the first few years, as well as future savings if market rates decline.

If you’re looking for even more substantial savings or don’t want to risk a rate increase down the road, experts have another option.

“We’re seeing a mix of homeowners using shorter [loan] terms to lock in lower lifetime interest costs,” said Charles Goodwin, a vice president at Kiavi.

Take that $400,000 30-year fixed-rate mortgage we mentioned above, with a 7.25% interest rate and a monthly payment of $2,729. Freddie Mac data has shown the average rate on a 15-year fixed-rate mortgage hovering in the mid-5% range.

Let’s still assume your remaining balance is $395,000, but you refinance into a 15-year term with a 5.5% rate. While reducing your mortgage term to 15 years would increase your monthly payment to $3,227, its drastically lower rate would save you more than $360,000 over the life of your loan.

In other words, use your time horizon as a guide to choose the best type of refinance in 2025. Planning to stay put for decades? A fixed-rate or shorter-term loan could save you thousands in lifetime interest. Expecting to sell or move within five years? Then it could be a good time to get an ARM and take advantage of lower interest rates.

You’ll encounter closing costs with every mortgage — refinances included. It helps to know what kind of costs to expect so you can calculate whether a refi is the right move before year’s end.

“Closing costs for a refinance are usually about two to six percent of your loan amount,” said Schmitt.

Think application and origination fees, your appraisal, and any real estate attorney fees that might apply. Those figures can add up quickly, especially if you’re refinancing a larger mortgage balance.

Goodwin emphasized the importance of doing the break-even math. “Divide your up-front costs by the monthly savings to see how long it takes for refinancing to pay for itself,” he said. If it takes five years to recoup your costs but you only plan to stay in your home for three, you might be better off skipping the refinance in 2025.

Both Goodwin and Schmitt noted that you can roll closing costs into your loan by either adding them to your principal or accepting a slightly higher interest rate in exchange for the lender covering the fees. The right type of home loan refinance in 2025 depends on your time horizon. If you’ll be in the home long term, paying up front often saves more. If not, rolling in the costs might make more sense.

Discover how to get a low-cost refinance.

Here’s the tough love: Refinancing in 2025 might not be a savvy money move for you. If not, home equity lending products could be the solution.

“For those who aren’t looking to change their existing mortgage terms or give up their current rate, a home equity line of credit may make more sense than refinancing,” said Schmitt.

A home equity line of credit (HELOC) creates a rotating credit line based on your current home equity. It can be a smart tool for paying for renovations or consolidating high-interest-rate debt, especially since HELOCS are tied to the prime rate and could get cheaper if the Fed cuts rates again this year.

If you’re considering a cash-out refinance but really only need to access a portion of your home equity, a HELOC may prove the wiser choice. “[A HELOC] lets you access cash without replacing your whole mortgage, which is especially helpful if your current rate is lower than what’s available today,” said Goodwin.

So, before you refinance your entire mortgage this year, ask whether you just need cash or if you also need to change your mortgage terms to get a lower rate or monthly payment. If it’s the former, a HELOC could keep more money in your pocket.

Read more about how to choose between a HELOC and a cash-out refinance.

Even if the numbers add up for a refinance in 2025 to make sense, qualification isn’t automatic.

Goodwin said qualification standards haven’t shifted much recently, but mortgage refinance lenders remain laser-focused on credit scores, debt-to-income ratios, liquidity, and home equity. “To get the best terms, you’ll want strong credit and ideally 20% or more equity,” he said.

His tips for prepping now? Pay down debt, avoid opening new credit lines, and keep your income documentation organized and up to date.

Schmitt also advised that you talk to a lending professional early. Even if you’re not ready to submit a refi application today, a lending advisor can walk you through options and flag any potential hurdles.

Winter tends to bring a slowdown in homebuying, which can potentially free up a lender’s pipeline for refinancing applications. The end of the year can also be a good time to prepare your budget for 2026, and if you’re looking for lower monthly mortgage payments next year, refinancing now could be a good idea. What matters more than season, however, is whether today’s rates save you money. If the math works, the weather doesn’t matter.

Savings will vary, but the key factor is the difference between your current mortgage rate and the new one. Even half a percentage point can shave hundreds off your monthly payment if your loan balance is large enough. To know for sure, calculate your break-even point — that’s how long it’ll take for your monthly savings to cover the closing costs on your refi. Beyond that point, you’ll enjoy pure savings.

If you want to change your loan terms, such as switching from a 30-year to a 15-year mortgage, refinancing makes sense. The interest savings alone are a home run. However, if you just need cash for a renovation or debt consolidation, a HELOC or home equity loan might be the smarter option. You’ll avoid closing costs and won’t have to replace your entire mortgage. This is especially beneficial if you already have one of those rock-bottom, pandemic-era mortgage rates.

Laura Grace Tarpley edited this article.

You may want to refinance when mortgage rates drop or you have a significant amount of home equity. However, before starting the process, it is essential to understand the pros and cons. Refinancing your mortgage means trading in your original home loan with a new one. And while this process offers many benefits — such as allowing you to lock in a new interest rate or lower your monthly payments — it also comes with some drawbacks that could potentially be a deal breaker.

Determine whether to use the same mortgage lender when you refinance.

Refinancing a mortgage loan can be time-consuming, but the following benefits could make it worthwhile.

One of the most common reasons homeowners refinance their mortgages is to unlock a lower mortgage interest rate, especially if rates have dropped since they first took out their home loan. A lower interest rate can save you a good chunk of change on interest payments over the life of the loan.

Let’s say you took out a $300,000 mortgage with a 30-year fixed term and 7% interest rate, resulting in a monthly payment of $1,996 toward your principal and interest. If refinancing reduces your mortgage interest rate to 5.75%, your monthly payments will drop to $1,751.

Of course, it won’t be quite as simple as the above equation. Your new monthly payment will also depend on your outstanding loan balance, new term length, and recurring fees like property taxes and homeowners insurance. But this example should give you an idea of how a lower mortgage rate can save you money.

You may be eligible for a cash-out refinance if you have at least 20% equity in your home. This type of mortgage refinance helps you tap into the equity in your house to cover big-ticket purchases or expenses, such as medical bills or home improvement projects. A cash-out refinance replaces your original loan with a new, bigger one. You’ll then receive the difference between the two in a lump-sum payment that you can use for any purpose.

Be careful when using money from a cash-out refi to pay off unsecured debt, such as student loans or a personal loan. While there can be consequences for not paying off these debts, it’s riskier to be unable to afford mortgage payments — you risk facing foreclosure and losing your home.

However, if you’re drowning in high-interest debt (such as with credit card debt), a cash-out refinance could be a smart choice since mortgage rates are usually lower than credit card rates. Weigh the pros and cons of cashing out before making your decision.

If you’re unhappy with your current loan features, refinancing allows you to adjust and tailor your mortgage to meet your needs. For example, you can shorten your loan term to pay off your mortgage sooner or switch from an adjustable-rate mortgage to a fixed-rate one for more predictable payments. You can also lengthen the loan term if your priority is to lower your monthly payments.

If you took out a conventional home loan and put down less than 20%, you're most likely paying private mortgage insurance (PMI), which protects the lender should you default on your mortgage. According to Freddie Mac, monthly premiums for PMI generally range from $30 to $70 for every $100,000 you borrow. This can add hundreds of dollars to your monthly payments, depending on the size of your home loan.

The good news is that PMI isn’t permanent. Your lender has to cancel your PMI once you reach 22% in home equity, but you can request to remove it when you have 20% equity. You can also get rid of PMI if you refinance with 20% equity in the house. So, if your home value has gone up or you’ve paid down a significant chunk of your loan balance, refinancing to a new loan can help you eliminate this extra cost.

Refinancing gives you the opportunity to add or remove a co-borrower from your mortgage. For example, if you want to make changes to your mortgage after a divorce, you can refinance to remove your former spouse as a co-borrower.

If you bought your home with the help of a co-borrower and can now handle the payments on your own, refinancing can be a solution. You can also add a co-borrower if you’re getting married and want to combine finances with your spouse.

Learn how to change the name on your house deed.

Though refinancing your mortgage can help you change the term of your current loan, lower your monthly payments, and get rid of PMI, you still need to be aware of some downsides.

Refinancing isn’t free. You’ll have to pay closing costs each time you refinance, and these costs are typically anywhere from 2% to 6% of your remaining loan balance.

Here are just some of the potential costs involved in refinancing:

Origination fee

Credit check fee

Appraisal fee

Discount points

Title search and insurance charges

Prepayment penalties

Recording fees

Real estate attorney fees

These expenses can quickly add up and cancel out the benefits of refinancing. Do the math beforehand to see how much you’ll pay on closing costs and how long it will take you to recoup those expenses with lower mortgage payments. This is what’s known as your break-even point. For example, if your break-even point is three years and you don’t plan to stay in the house that long, refinancing probably won’t make financial sense.

A common reason homeowners refinance is to reduce their monthly mortgage payments, often by extending their loan term to 30 years. If this is what you’re looking to do, just know that you could end up paying more interest over the life of the loan since you’re stretching your mortgage out over a longer period.

Use our mortgage calculator to crunch the numbers and understand the impact of lengthening your loan term.

On the other hand, if you’re refinancing to shorten your repayment timeline, expect your monthly mortgage payments to increase. Let’s say you are refinancing from a 30-year mortgage term to a 15-year one. Your monthly payments would increase because you’re paying off the loan in a much shorter timeframe.

Shortening your loan term through refinancing may not be your best option unless you can afford higher monthly mortgage payments.

While a cash-out refinance lets you borrow against the equity in your home, it also results in taking out a larger loan than you would with a standard rate-and-term refinance. And because you’re borrowing more, your overall debt level will go up. This can lead to a higher debt-to-income ratio (DTI), potentially making it more challenging to secure loans in the future, as lenders may view you as a higher risk.

Read about the best cash-out refinance mortgage lenders.

Refinancing isn’t for everyone, and it doesn’t always make financial sense. Just because your neighbor is refinancing doesn’t mean you should. The key is knowing when it's a good idea to refinance.

If your goal is to save money by refinancing, it can be a good idea if you’re planning to stay in the home beyond the break-even point.

The break-even point applies to cash-out refinances too. If you’re tapping your home equity to finance a home improvement project, you’ll want to calculate your break-even point by factoring in the closing costs, the cost of the home repairs, and the amount you expect to get back in added value when you eventually sell the house.

Whatever your reason for mortgage refinancing, weigh the pros and cons before moving forward. Also, consider talking to a loan officer, refinance lender, or mortgage broker if you need help deciding whether you’re in a good spot to refinance.

Yes, refinancing can hurt your credit score, as the lender will need to conduct a hard credit inquiry to check your score when you apply. But it’s usually just a small and temporary dip.

You can refinance your home as many times as you like since there aren't any hard and fast rules regarding how often you can refinance your mortgage. However, some lenders enforce a waiting period before borrowers can refinance their loans, so you’ll want to check if any apply to you.

When you refinance, your original mortgage is replaced with a new loan, typically with a different loan term and interest rate. Your lender will then pay off your old mortgage with the new one, leaving you with just one mortgage loan.

Laura Grace Tarpley edited this article.

Home equity can be a helpful way to pay for home repairs, renovations, or improvements. Not only do home equity loans and lines of credit typically come with lower interest rates than other forms of borrowing, but they also come in fairly large loan amounts (usually up to 80% of your equity). You could also earn a valuable tax deduction with these products. Still, every homeowner should understand the process and its pros and cons before taking equity out of their house to pay for home improvements.

Learn more: The best home equity loan lenders

Home equity is the portion of your house’s value you actually own. To calculate yours, you take the value of your home and subtract your outstanding mortgage balance. That’s your home equity stake.

Let’s say you own a $400,000 home and still owe $300,000 on your mortgage loan. Here’s how to determine how much equity you have:

$400,000 - $300,000 = $100,000.

You have $100,000 in equity.

$100,000 is 25% of $400,000, so you have 25% equity in your home.

You build home equity every time you make a mortgage payment because you are paying down your loan balance. Your equity also increases when your home gains value (or decreases if your home loses value).

Read more: How to use home equity to build wealth

When you build up enough equity, you have a few options for tapping into it. You can use money from the following financial products for any purpose, but many borrowers put the money toward home improvement projects and major renovations.

Here are your main financing options for putting your home equity toward home improvements.

In some ways, home equity loans work similarly to traditional mortgages. You get an up-front lump sum, and then you repay the balance monthly over an extended period of time, such as 30 years.

Home equity loans tend to have fixed interest rates. This is ideal if you have one or two main home improvement projects, know how much money you need, and want to use the cash all at once. It’s also good if you want fixed, predictable payments.

Because they’re lines of credit, HELOCs work more like credit cards. You can withdraw money from the allotted amount during the draw period, which typically lasts 10 years. You’ll usually only make interest payments during this time.

HELOC lenders often charge variable interest rates, meaning the rate can rise or fall over the loan term. Make sure you can handle the changing interest rate and payments that come with a HELOC.

Because you take out money as you need it, HELOCs can be ideal if you have several ongoing improvement projects or aren’t sure how much a renovation project will cost up front.

Home equity sharing contracts allow you to sell a portion of your home’s future value to investors in exchange for a lump sum. You don’t have to pay interest or make monthly payments, but you do have to pay off the balance — plus a portion of your home’s appreciation when your term ends or you sell the home.

Home equity sharing can benefit homeowners whose credit scores are too low to qualify for home equity loans or HELOCs. However, it is only available in certain markets where home equity investing companies operate. Some examples of these companies include Unison, Hometap, and Point.

Learn more: How to tap into home equity with a second mortgage

Home equity is often a good way to pay for home improvements, but it’s not always the right answer. If you’re considering putting your home equity toward repairs or home projects, weigh these pros and cons first.

Potential tax deduction. If you use your home equity funds to “buy, build, or substantially improve” your home, you can deduct the interest from your loan on your annual tax return.

Lower interest rate than other options. HELOCs and home equity loans tend to have much lower interest rates than other borrowing options you might be considering, including credit cards and personal loans.

It could improve your home value. Depending on what improvements you make, you could increase your home value. This could lead to higher profits when you sell.

Large loan amounts. Many lenders will let you borrow up to 80% of your home equity (sometimes even 90%). If you’ve paid down a substantial percentage of your debt, this could amount to a pretty hefty sum.

Puts your home at risk. Home equity loans and HELOCs are secured loans, meaning they use your home as collateral, so if you fail to make payments, your lender could foreclose on your house. Unsecured debts, such as credit cards, don’t put your real assets in jeopardy.

Reduces your equity. Taking out a HELOC or home equity loan lessens how much equity you have in your home. Should your property lose value later, you could end up owing more on the home than it’s worth. This could result in selling your home at a loss.

It may come with closing costs and fees. As with your original mortgage, you’ll typically need to pay various closing costs and fees when you use a home equity product. Make sure to shop around for HELOC and home equity loan lenders to find ones that charge fewer fees.

Need lots of equity to qualify. You will usually need at least 20% equity in your home to qualify for a home equity loan or HELOC. So, on a $300,000 house, your mortgage balance when applying should be no more than $240,000.

If you’re not sure whether the pros outweigh the cons in your situation, talk to a professional. A mortgage broker, loan officer, or financial planner can help you make the right decision for your goals and budget.

Read more: How much can you borrow with a HELOC?

Borrowing against your home equity to pay for improvements can be a smart move, as long as you borrow only what you need and can afford to cover the monthly payments. Failing to make payments on a home equity loan or HELOC could lead to foreclosure — meaning you’d lose your house.

Two of the best types of loans for home renovations are home equity loans and HELOCs. Home equity sharing agreements may also be an option, depending on where you live. All three let you take equity out of your house, which you can use for home improvements.

The difference lies in how you receive the money. With a home equity loan, you’d get $50,000 up front and pay interest on that entire amount. A $50,000 HELOC, on the other hand, functions more like a credit card. You can withdraw as much (or as little) as you like from that $50,000 over a set period of time, and you’ll only pay interest on what you take out.

A HELOC can be a good option for home improvements, as it allows you to withdraw money over an extended period of time. If you need to buy materials or pay a contractor invoice, for example, you can withdraw funds from your HELOC to cover those as needed. HELOCs usually have draw periods of 10 years and repayment periods of 20 years.

Laura Grace Tarpley edited this article.

Interest rates on loans have been climbing in recent years. Car loans with 5-year terms are at almost 8%, personal loan rates are averaging over 11.5%, and credit card rates are over 21%. While mortgage rates are high compared to a few years ago, they’re still lower than rates on other types of consumer debt. So, refinancing your mortgage could be a great way to consolidate your debts.

A mortgage refinance is a loan swap. You take your old home loan to a lender — it doesn't have to be the same one that gave you the original mortgage — and apply for a new loan. If approved, the refinance lender issues you a new mortgage loan, and the proceeds from that loan pay off the old one.

There are new fees, another loan closing, a new payment, and a recalculated loan balance.

Read more: Should you refinance your mortgage with the same lender?

There are two ways homeowners can refinance and pay off debt:

Paying off debt is the most common reason people get cash-out refinances.

With regular payments over the years and some rising market value in your house, you may have some equity. That's the difference between your home’s value and what you owe. While terms vary by the cash-out mortgage lender you choose, if you have sufficient equity, you can draw some of it as cash and add it back into the new mortgage balance with a cash-out refinance.

Here’s a step-by-step example of using a cash-out refi to pay off your debt:

1. You take out a new mortgage in the amount of your current mortgage balance, plus the total balances on your credit cards or other loans you’re looking to consolidate. So, if you have $50,000 in credit card debt and a $150,000 mortgage balance, you would take out a new loan for $200,000.

2. Your new loan pays off the old mortgage balance, and the mortgage lender pays you the remaining amount in cash. In this example, the new loan would pay off your outstanding $150,000 mortgage balance, and you’d have $50,000 left over.

3. You then use that $50,000 to pay off your credit card debt.

It might sound complicated, but the goal is simple: Rolling those debt balances into your mortgage loan. This allows you to have just one single payment per month, and often, it will also mean a lower interest rate and lower long-term interest costs.

However, your cash-out refinance will likely require payments for 15 or 30 years, amounting to a lot of interest paid over the years. Carefully consider whether you're improving your debt situation by using a long-term home loan to pay off what may be short-term debt.

When you refinance to get a lower interest rate or to change the number of years you'll pay on the mortgage, it's called a rate-and-term refinance.

You won't get a lump sum of money by using this method, but you might lower your monthly mortgage payment. Then, you can use the monthly savings to make debt payments.

If current refinance rates are lower than the interest rate on your existing mortgage, you can save some money on your monthly payment. Extend the term and save even more monthly. The difference between your old and new payments may give you some monthly cash to apply to the debt you're working to eliminate.

Again, it's a math puzzle. Ask yourself this: Is it worth paying more interest on the new mortgage over the long term to pay off short-term debt?

A refinance is basically trading in your old home loan for a new mortgage. But before you say goodbye to that old mortgage, consider its interest rate.

It's hard to give up that rate, and rightfully so. If your interest rate is below the current market rate, you're way ahead of today's home buyers. If you are desperate to tap into that equity to pay off debt, look into the second mortgage solutions we cover below.

Otherwise, if you have enough equity for a refi, you might be able to take out money to pay off the debt and shorten the loan term on your cash-out refinance to make up for the higher interest rate you'll pay.

However, your monthly mortgage payment will rise substantially.

You're all good. Feel free to get out there, snag a lower mortgage loan rate, and pay off that high-interest debt.

However, remember you're starting over with your home loan debt. To get back on track with building wealth in your home, go for the shortest payback term you can handle.

You may have a super-low mortgage rate if you've had your loan for a while. Perhaps current mortgage rates are higher, and you don't want to let go of it with a refinance. What if you could keep your low home rate and pay off your debt? You can.

According to Cotality, Americans gained a little over $4,000 in home equity, on average, in 2024. That money keeps growing virtually inside the walls of your home. Getting to it is the challenge.

If you don't want to lose the current interest rate on your original mortgage with a refinance, you can consider a second mortgage. It's another home loan with a new interest rate. Yes, you'll have two mortgages, but remember — you get to keep that great interest rate on your current loan. Second mortgage options include:

Home equity loan: This is a second mortgage paid in a lump sum. It's perfect for eliminating that chunk of debt.

Home equity line of credit: This is another second mortgage option, but a HELOC lets you draw from your equity as you need it. Pay it down; use it again. Very handy.

Read more: The best HELOC lenders right now

A balance transfer card. A low introductory rate on a new credit card and transferring the balance from a higher-interest-rate card may be worth a try.

A debt consolidation loan. It's a personal loan approved with your signature. Watch out for that interest rate, though — personal loan rates tend to be higher than mortgage refinance rates.

Credit counseling. Working with a professional credit counseling agency can help reduce debt and negotiate settlements with creditors.

You will likely reduce interest charges. Mortgages charge lower interest rates than the typical credit card.

If you itemize your deductions on your tax return, paid mortgage interest is tax-deductible. Consumer credit is generally not. Talk to a tax advisor to learn more.

You stretch your payments over many years, reducing your monthly debt load.

You simplify your repayment structure. You only have to make one payment each month, and a mortgage loan gives you a fixed payoff date, unlike a credit card.

Consolidating your debts can free up more cash flow and allow you to achieve other financial goals, like saving for retirement or investing in the stock market.

By spreading your payments out over multiple years, you increase the total interest you pay.

Most importantly, you're putting your home up as collateral for whatever you paid with credit cards, student loans, or personal loans. If your financial situation sours, you could suffer foreclosure and lose your home. There can be legal consequences for not repaying those other unsecured loans, but you wouldn’t lose your house.

Refinancing can be expensive. Like with your first mortgage, you have to pay up-front closing costs again. You'll want to stay in your home long enough to recoup those expenses.

Refinancing doesn’t automatically solve the root issue that led to your debt problem. If you’re not careful, you could end up with sky-high credit card balances and debts all over again.

Refinancing to consolidate debt can be a good idea if you’re able to get a lower interest rate than your current debts offer, and if it will save you money in the long run.

Run the full range of numbers, accounting for the refinance costs, the interest costs on your new mortgage loan, and the payoff timeline. This will help you understand whether it makes sense to refinance in your situation.

It’s probably not a good idea to refinance if doing so would mean a notably higher rate on your current mortgage loan. If refinancing would create a monthly payment that really stretches your budget, it could increase your risk of foreclosure.

Refinancing your mortgage to repay debt will likely improve your credit score gradually. Research by the CFPB found a steep improvement in credit scores immediately after a cash-out refinance — followed by a slow decline. Ultimately, on average, credit scores remained above pre-cash-out refi levels.

You can if you have enough equity in the home. Most lenders will look for about 20% equity. According to the CFPB, the median combined loan-to-value ratio (CLTV ratio) for cash-out refinances from Q1 2013 to Q1 2023 was 70% (equaling 30% equity).

The biggest risk of refinancing your mortgage to pay off debt is that you're moving unsecured debt to a loan guaranteed by your house. Missing payments on secured debt is much riskier than missing payments on unsecured debt. Some other reasons why you shouldn't refinance to pay off debt include: You plan to move soon, your interest rate is lower than the market currently offers, the closing costs are higher than the debt you want to pay off, or you are close to paying off your mortgage.

Laura Grace Tarpley edited this article.