10 Home Refinance Myths You Shouldn’t Believe

Refinancing one’s home is a brilliant way of saving money. It may help you to get a lower interest rate, lower your monthly rate, or get some cash. However, many people shy away from refinancing due to common misconceptions.

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Let’s clear up the confusion. In this article, we are going to tell you about the top home refinance myths that you should not believe, and which are written simply so that all people can understand.

Myth 1: You Can Only Home Refinance Once

Truth: You can refinance more than once if it helps you save.
Some people think refinancing is something you can only do once. That’s not true. If interest rates go down again, or your credit improves, you can refinance again.

Just make sure the money you save is more than the cost of refinancing. If the savings are greater, it’s probably worth doing.

Myth 2: Refinancing Costs Too Much

Truth: There are costs, but many people still save money overall.
Refinancing does have some fees, like paperwork and appraisal fees. But if you’re getting a lower interest rate, your monthly payment could go down enough to make up for those costs within a couple of years.

You can even ask the lender to show you a “break-even” point—how long it takes before your savings are more than the fees.

Myth 3: You Need Perfect Credit

Truth: Many people with average credit can still refinance.
You don’t need a perfect credit score to refinance. A higher score helps you get the best rate, but even with fair or okay credit, you might still qualify.

Some loan programs, like FHA and VA loans, are made for people with lower scores. So don’t assume you can’t refinance—check your options first.

Myth 4: Refinancing Starts Your Loan Over

Truth: You don’t have to restart your loan unless you choose to.
Some people think refinancing means starting a brand-new 30-year loan. That can be true, but it’s not your only choice.

You can also choose a shorter loan, like 15 or 20 years. You can even match your current loan’s time left. For example, if you have 22 years left, you might refinance into a 20-year loan.

Myth 5: You can’t Refinance If Your Home Value has dropped

Truth: Some loan programs help even if your home is worth less now.
Suppose your home has lost value; refinancing might still be possible. There are special programs that help people in this situation. If you've been paying on time, some don't even need an updated assessment or plenty of paperwork.

The goal of programs like VA IRRRL and FHA Streamline is to help those who owe more than the value of their house.

Myth 6: It’s Only Worth It If You Save 1% or More

Truth: Even small savings can make a big difference.
Perhaps you have been told that to make a refinance worth it, at least 1% should be saved on the interest rate. However, even 0.5% can equal thousands of dollars in savings over time, especially with a large loan amount or if you intend to stay for many more years.

Always ask for the total savings over time, not just monthly savings.

Myth 7: Refinancing Lowers the Equity in Your Home

Truth: Your ownership doesn’t change unless you take out cash.
Your ownership interest (equity) in your house is not lost by a refinance alone. Unless you undertake a “cash-out refinance,” which provides you with money from the value of your property, your equity remains unchanged. That option is your choice.

If you just want a lower payment or better rate, your equity stays as it is.

Myth 8: You Need a Lot of Cash to Refinance

Truth: Some refinance options don’t require any cash up front.
Yes, refinancing has some costs, but you may not need to pay them out of pocket. Many lenders let you add the costs to the new loan, so you don’t need to pay them all at once.

Some government-backed loans also have lower costs or don’t require a new home appraisal.

Myth 9: Refinancing Hurts Your Credit

Truth: It may lower your credit score a little, but only for a short time.
Applying for a refinance means the lender will check your credit. This can drop your score by a few points, but the effect is usually small and temporary.

If you keep paying on time after refinancing, your score can recover quickly and might even go up over time.

Myth 10: Refinancing Is a Lot of Work

Truth: Refinancing is now quite easy compared to what it was.
You can believe that refinancing takes a lot of effort and paperwork, but the procedure is easier now. Many lenders allow you to fill out an application on the Web, upload documents electronically, and get in touch through e-mail.

In addition, some refinance programs do not require the new appraisal or the proof of income, which especially does not apply if you are decreasing your rate.

Refinancing your home can be a very smart thing to do financially, but it is something that too many people don’t do because of myths that aren’t true.

Here’s a quick recap of the home refinance myths you shouldn’t believe:

You can refinance more than once.
It’s not always too expensive.
You don’t need perfect credit.
You don’t have to restart your loan.
You can refinance even if your home value has dropped.
A small interest rate drop can still help.
You won’t lose ownership unless you cash out.
You don’t always need money up front.
Credit impact is small and short-term.
The process is easier than many people think.