Despite the recent rise in interest rates, refinancing can still be a viable option for some homeowners. If you’re new to refinancing, you may have many questions about the process and may have encountered some misinformation. Let’s clear up some common myths about mortgage refinancing.

Myth 1: Refinancing is cost-free

Unfortunately, that’s not the case. Homeowners often hear about the savings from refinancing their mortgage, but rarely about the upfront costs involved. While you don’t need to make a down payment, refinancing still involves closing costs, just like your original mortgage.

These fees can range from 2 to 5 percent of the new loan principal. For instance, on a $250,000 mortgage with 3 percent in fees, you would pay $7,500 upfront. Many lenders allow you to roll these costs into your new loan, which increases the principal you need to repay.

Myth 2: The interest rate is the most important factor

For many homeowners, securing the lowest interest rate is a top priority when refinancing. However, the loan term is another crucial factor to consider, as it affects the overall savings.

When you refinance into a loan with the same term, you essentially reset the payment schedule, explains Michele Sine, portfolio manager and senior wealth advisor at ImpactAdvisor. For example, if you’ve been paying on a 30-year mortgage for 10 years and refinance into another 30-year loan, you start from scratch. This extension adds 120 more monthly payments, and during the early years, these payments primarily cover interest, costing you more over time.

“It’s an uneven playing field when it comes to payments. In short, the bank always wins because they get their money first,” says Sine.

To save money over the life of your loan, consider refinancing to a loan with a lower rate and a shorter term, such as switching from a 30-year fixed-rate mortgage to a 15-year fixed-rate mortgage. Alternatively, you can make additional monthly payments to repay the loan faster.

Myth 3: A refinance will affect selling the house

Refinancing your mortgage does not add an additional lien to your home. Instead, it replaces the existing primary lien with a new one. This means refinancing has no impact on any future home sale or your property title.

Refinancing is based solely on your ability to repay the loan, as demonstrated by your credit and employment history. It does not impose any additional restrictions on future sales beyond those of your original mortgage.

Confusion often arises with other types of debt that use your home as collateral, such as home equity loans (second mortgages) and home equity lines of credit (HELOCs). These loans are typically taken out for specific needs, like home improvements or repairs. In these cases, you would need to repay or settle these loans at closing before selling the home.

Myth 4: You won’t need a credit check

You might be surprised to learn that lenders require a credit check when refinancing a home loan. Even if you’ve been making timely payments, lenders need to reassess your credit because refinancing is considered a new loan, and they must evaluate your current financial situation.

“Typically, homeowners with credit scores above 760 qualify for the best refinancing rates,” says Leslie Tayne, founder and head attorney at Tayne Law Group in Westchester County, New York. “Lenders will also look for a debt-to-income (DTI) ratio under 36 percent to ensure you aren’t overburdened with debt and can repay the loan. Some homeowners may be surprised to find they don’t qualify.”

Before applying for refinancing, check your credit score and calculate your debt-to-income ratio. Since the goal of refinancing is to secure the best rate, ensuring your financial situation is strong will help you achieve a better rate or significantly lower your current one.

Myth 5: You can only refinance your mortgage once

A common mortgage myth is that you can only refinance your mortgage once. In reality, there is no limit to how many times you can refinance. However, because refinancing involves significant fees, it’s important to ensure that each refinancing decision is worthwhile. Using a refinance calculator can help you determine if refinancing makes sense, especially if you’ve already refinanced in recent years.

You do need to wait between refinancing applications. “While you can technically refinance your mortgage as many times as you like, many lenders require a ‘seasoning’ period—a specific amount of time between refinances—before they will approve another one,” says Tayne. “Additionally, if your loan has a prepayment penalty, you could incur charges for refinancing again.”