A refinance replaces your current mortgage with a new one. People do it to get a lower rate, to change the loan's length, or to take cash out of their equity. The rate is the part everyone watches, but it's rarely the part that decides whether a refinance is a good idea. This guide covers the arithmetic, the two main kinds of refinance, and where credit unions tend to come out ahead.
When refinancing makes sense, and when it doesn't
A refinance costs money to close — appraisal, title, recording, and whatever the lender charges. You earn that back through lower monthly payments. The question is how long that takes, and whether you'll still have the loan by then.
The arithmetic is simple. Divide your closing costs by your monthly savings:
- Current loan: $350,000 balance at 7.25%, principal and interest about $2,388/month.
- New loan: $350,000 at 6.50%, about $2,212/month. Savings: about $176/month.
- Closing costs: $5,000. Break-even: $5,000 ÷ $176 ≈ 28 months.
If you'll stay in the house and keep the loan for more than about two and a half years, that refinance pays off. If you might sell next year, it doesn't. Those figures are an example, not a quote; plug in your own.
That's why there's no single rate drop that makes refinancing worthwhile. You'll hear rules of thumb like "refinance when rates fall a full point." A small drop with very low closing costs can pay back quickly. A large drop with expensive closing costs, on a house you're about to sell, may never pay back. It depends on how long you'll stay and what you'll pay to close.
The term-reset trap
Monthly savings can hide a real cost. Say you're eight years into a 30-year mortgage and refinance into a new 30-year loan. Your payment drops, partly because of the lower rate and partly because you've just stretched the remaining 22 years back out to 30. You may end up paying more total interest even at a lower rate.
Two ways around it: refinance into a shorter term (a 20- or 15-year), or keep making your old payment amount on the new loan. The 30-year vs. 15-year vs. ARM guide goes through the trade-offs between loan lengths.
Rate-and-term versus cash-out
There are two main kinds of refinance, and lenders price them differently.
- Rate-and-term refinance. You replace the loan with one of roughly the same balance, to change the rate, the term, or both. This is what most people mean by refinancing.
- Cash-out refinance. You take a larger loan than you owe and receive the difference in cash. Lenders see this as riskier, so cash-out usually prices higher than rate-and-term for the same borrower, and there are limits on how much of your equity you can take.
If you only need a smaller amount of cash, a home equity loan or line of credit can leave your existing low-rate first mortgage alone. That's outside what this site covers, but worth pricing before you give up a good rate to get at your equity.
What credit unions do differently
Credit unions often charge lower closing costs than other lenders, and some charge no lender fees at all on certain loans. Not all of them, and not on every product — but it's common enough to be worth checking.
That matters more on a refinance than on a purchase. On a purchase, the down payment dominates the cash you bring to closing, and a few hundred dollars of lender fees get lost in it. On a refinance there's no down payment. Closing costs are most of what you pay up front, so they drive the break-even directly. Cut closing costs in half and you roughly cut the break-even in half.
This is exactly why APR matters more than rate when you're refinancing. APR folds the lender's fees into a single number. Two refinance quotes at the same rate can have very different APRs, and the lower APR is usually the one that pays back sooner. The guide to APR, rate and points explains how to read them together. Our tables rank by APR where credit unions publish it.
A caution about our own data
Every refinance rate on this site is an advertised rate, published by the credit union under its own assumptions: its own loan-to-value ratio, credit score, loan amount and occupancy. Those assumptions differ from one credit union to the next, and most don't publish them.
Refinance pricing is especially sensitive to two of them. Loan-to-value — how much you owe compared with what the house is worth — and credit tier both move refinance pricing more than most people expect. An advertised rate that assumes 60% loan-to-value and a 780 score won't be what you're offered at 85% and 700.
We deliberately don't adjust or normalize those differences. Doing it properly would mean guessing each credit union's pricing grid, and a confident-looking guess is worse than an honest advertised number. The methodology page explains that choice and what we do check. Treat our tables as a shortlist, then get real Loan Estimates from the two or three credit unions at the top.
Streamline refinances for FHA and VA loans
If your current loan is an FHA or VA loan, there's a shortcut worth knowing about. Both programs have a simplified refinance — the FHA Streamline and the VA Interest Rate Reduction Refinance Loan, usually called an IRRRL — that can skip some of the paperwork and, in many cases, the appraisal. The rules are set by those agencies, not by the lender, so check the VA's IRRRL page or HUD for the details.
Not every credit union offers these, and we don't track streamline products as a separate category, so you'll need to ask. The same break-even arithmetic still applies: a simpler process is only a good deal if the savings outrun the costs before you'd sell or refinance again. See VA loans at credit unions for more on the VA side.
Membership first
You have to be a member of a credit union before it will refinance your mortgage. Joining is usually simple — open a savings account with a small deposit — but it isn't instant. Between identity checks, the eligibility review and funding the account, expect days rather than minutes.
If you're watching rates and waiting for the right moment, join the credit union you're most likely to use before that moment arrives. Rates can move within a week, and you don't want membership paperwork to be what makes you miss a good one. If you're not sure which credit unions you can join, the membership guide covers the rules.
Finding refinance rates
Of the 1,185 credit unions we track, 130 currently publish at least one refinance-specific rate. That number comes live from the database. Many others use the same rates for purchase and refinance and say so, and we show those under both.
There's a third group worth knowing about: credit unions whose purchase rates also apply to a refinance, even though nothing on their rates page says so. They simply haven't written it down. If you find a good purchase rate from a credit union you can join, it's worth asking them directly whether that rate holds for a refinance — sometimes it does, and no page on their site will tell you. We can only show what a credit union publishes, so a lender can look purchase-only here and still refinance at the same rate.
On any state rate page, the product selector includes 30-year fixed refinance, 15-year fixed refinance and ARM refinance variants. Each is ranked separately from purchase rates, so you're comparing like with like. The ZIP search on the home page does the same for your location.
The short version
- Divide closing costs by monthly savings. If you'll keep the loan longer than that, it pays.
- Watch the term reset. A lower payment can still cost more in total.
- Cash-out usually prices higher than rate-and-term.
- Credit unions' lower fees matter more on a refinance. Compare APR, not rate.
- If a credit union's purchase rate looks good, ask whether it applies to refinances too — often it does, even when the page doesn't say.
- Our rates are advertised rates under each credit union's own assumptions. Get real quotes.
- Join before you need to.
— Clay Whitfield