Mortgage Refinance Calculator
Current Mortgage
New Mortgage
When to Refinance
- Rate drop of 0.75%+
- Improved credit score
- Remove PMI
- Shorten loan term
- Moving soon
- High closing costs
- Extending term significantly
- Cash-out for non-essentials
Related Calculators
Understanding Mortgage Refinancing
What is Refinancing?
Refinancing replaces your existing mortgage with a new loan, typically to get a lower interest rate, change your loan term, or access equity. The process involves closing costs similar to your original mortgage, so it's important to calculate whether the savings justify the upfront expense.
The Break-Even Rule
The break-even point is how long it takes for your monthly savings to exceed the closing costs. If you plan to move before the break-even point, refinancing may not make financial sense.
Types of Refinancing
Rate-and-Term Refinance
Change your interest rate and/or loan term without taking cash out. Most common type of refinance used to lower payments or pay off the loan faster.
Cash-Out Refinance
Borrow more than you owe and take the difference as cash. Often used for home improvements, debt consolidation, or major expenses.
Cash-In Refinance
Pay down principal to reach 20% equity and eliminate PMI, or to qualify for a better rate. Less common but can be strategic.
Streamline Refinance
Simplified process for FHA, VA, or USDA loans with reduced documentation and often no appraisal required. Lower closing costs.
Typical Closing Costs
| Fee Type | Typical Range | Notes |
|---|---|---|
| Origination Fee | 0.5% - 1% | Negotiable |
| Appraisal | $300 - $600 | Required for most loans |
| Title Search & Insurance | $500 - $1,500 | Varies by state |
| Credit Report | $30 - $50 | Per applicant |
| Recording Fees | $50 - $250 | County dependent |
| Total (Typical) | 2% - 5% | Of loan amount |
Refinance Decision Framework
Example Scenario
Worth Refinancing
Current: $300K at 7% (25 years remaining) = $2,117/month
New: $300K at 5.5% (30 years) = $1,703/month
Closing Costs: $6,000
Monthly Savings: $414
Break-Even: 15 months
If staying 5+ years, this refinance makes sense!
Important Considerations
This calculator provides estimates based on the information you enter. Actual rates, terms, and closing costs will vary by lender and depend on your credit score, equity, and other factors. Always compare official Loan Estimates from multiple lenders before deciding to refinance.
Frequently Asked Questions
When does it make sense to refinance my mortgage?
Consider refinancing when you can lower your rate by at least 0.5-0.75%, your credit score has improved significantly, you want to remove PMI, or you need to change your loan term. The key is calculating the break-even point - if you'll stay in the home longer than that, refinancing typically makes sense.
What is the break-even point on a refinance?
The break-even point is how long it takes for monthly savings to exceed closing costs. Calculate it: Break-even months = Closing costs / Monthly savings. If closing costs are $6,000 and you save $200/month, break-even is 30 months. If you're moving before then, refinancing may not be worth it.
What are typical refinance closing costs?
Expect 2-5% of the loan amount in closing costs, including origination fees (0.5-1%), appraisal ($300-600), title insurance ($500-1,500), and various other fees. Some lenders offer 'no-closing-cost' refinances, but they charge higher interest rates to compensate.
Should I do a cash-out refinance?
Cash-out refinances let you borrow against home equity, but they increase your loan balance and potentially your rate. Good uses include home improvements (adds value) or high-interest debt consolidation. Avoid using cash-out for vacations or depreciating assets - you're putting your home at risk for those purchases.