Refinance Calculator

Determine if refinancing your mortgage makes financial sense

Mortgage Refinance Calculator

Compare your current mortgage with refinancing options to see potential savings and break-even point.

Current Mortgage Details

New Loan Details

Optional: Cost of purchasing points to reduce your interest rate

Refinance Analysis Results

New Monthly Payment: $0.00
Monthly Savings: $0.00
Total Cost of Current Loan: $0.00
Total Cost of New Loan: $0.00
Lifetime Savings: $0.00
Break-Even Point: 0 months

Understanding Mortgage Refinancing

What is Mortgage Refinancing?

Mortgage refinancing is the process of replacing your existing mortgage with a new loan, typically to secure better terms or tap into home equity. When you refinance, you pay off your current mortgage and establish a new one, potentially with a different lender, loan term, interest rate, or loan amount.

Common Reasons to Refinance

Lower Your Interest Rate

One of the most common reasons to refinance is to take advantage of lower interest rates. Even a reduction of 0.5% to 1% can lead to significant savings over the life of your loan, potentially saving you thousands of dollars.

Change Your Loan Term

Refinancing allows you to adjust your loan term. You might choose to:

  • Shorten your term: Pay off your mortgage faster and save on interest, though monthly payments may increase.
  • Extend your term: Reduce your monthly payments by spreading the loan over a longer period, though you'll likely pay more in total interest.

Switch Loan Types

Refinancing can allow you to change from one type of mortgage to another, such as:

  • Converting from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage to lock in a rate and have predictable payments.
  • Switching from an FHA loan to a conventional loan to eliminate mortgage insurance premiums.

Access Home Equity

Cash-out refinancing allows you to tap into your home's equity by taking out a new mortgage for more than you currently owe and receiving the difference in cash. This can be useful for home improvements, debt consolidation, or other financial needs.

Key Considerations Before Refinancing

Break-Even Point

Refinancing involves upfront costs, including closing costs, appraisal fees, and potentially points. To determine if refinancing makes financial sense, calculate your break-even point—the time it takes for your monthly savings to exceed these upfront costs.

Break-even point (in months) = Total closing costs ÷ Monthly savings

If you plan to stay in your home longer than the break-even point, refinancing may be worthwhile.

Current Equity Position

Having at least 20% equity in your home can help you secure better refinancing terms and avoid private mortgage insurance (PMI).

Credit Score

Your credit score significantly impacts the interest rate you can secure. Before refinancing, it's wise to check your credit report and address any issues that might be lowering your score.

Market Timing

While it's difficult to perfectly time the market, being aware of interest rate trends can help you make a more informed decision about when to refinance.

Types of Mortgage Refinancing

Rate-and-Term Refinance

This is the most straightforward type of refinancing, where you simply change your interest rate, your loan term, or both, while keeping the loan balance approximately the same (accounting for closing costs).

Cash-Out Refinance

With a cash-out refinance, you take out a new mortgage for more than you currently owe and receive the difference in cash. This can be useful for home improvements, debt consolidation, or other significant expenses.

Cash-In Refinance

In a cash-in refinance, you bring money to closing to pay down your loan balance, potentially helping you qualify for better terms or eliminate mortgage insurance.

Streamline Refinance

FHA, VA, and USDA loans offer streamlined refinancing options that typically require less documentation and may not require an appraisal, making the process faster and less expensive.

Using Our Refinance Calculator

Our refinance calculator helps you determine whether refinancing makes financial sense for your situation. By comparing your current mortgage with potential new loans, you can see your potential monthly savings, lifetime interest savings, and how long it will take to recoup refinancing costs.

The calculator considers:

  • Your current loan balance, interest rate, monthly payment, and remaining term
  • The new loan amount, interest rate, and term
  • Closing costs and any points you might purchase

Remember that the results are estimates based on the information you provide. For a more precise analysis, consider consulting with a mortgage professional who can provide personalized advice about your specific situation.

Frequently Asked Questions About Refinancing

When is the best time to refinance?

The best time to refinance depends on your individual circumstances, but generally good conditions include:

  • When interest rates have dropped significantly (at least 0.5-1% lower than your current rate)
  • When your credit score has improved substantially since taking out your original mortgage
  • When you've built up significant equity in your home (ideally at least 20%)
  • When you plan to stay in your home long enough to recoup the refinancing costs

Rather than trying to time the market perfectly, focus on whether refinancing aligns with your financial goals and whether the savings justify the costs.

How much does it cost to refinance?

Refinancing costs typically range from 2% to 5% of your loan amount. These costs may include:

  • Application fee
  • Origination fee
  • Appraisal fee
  • Credit report fee
  • Title search and insurance
  • Recording fees
  • Underwriting fee
  • Potentially points (prepaid interest to lower your rate)

Some lenders offer "no-closing-cost" refinancing, but this typically means the costs are rolled into your loan amount or offset with a higher interest rate. Always ask for a Loan Estimate from potential lenders to compare the true costs of refinancing options.

Will refinancing affect my credit score?

Refinancing can temporarily impact your credit score in several ways:

  • When you apply for refinancing, lenders will perform a hard inquiry on your credit, which can cause a small drop in your score (usually less than 5 points).
  • If you shop around for rates with multiple lenders within a 14-45 day period (depending on the scoring model), these inquiries are typically treated as a single inquiry.
  • When you close your old mortgage and open a new one, your credit history and average account age may be affected.
  • If you use refinancing to consolidate debt, closing credit card accounts could impact your credit utilization ratio.

These effects are usually temporary, and maintaining good payment habits with your new loan will help your score recover and potentially improve over time.

Should I refinance to a 15-year mortgage?

Refinancing from a 30-year to a 15-year mortgage can offer several benefits:

  • Build equity faster
  • Pay off your mortgage sooner
  • Save significantly on interest over the life of the loan
  • Often secure a lower interest rate (15-year rates are typically lower than 30-year rates)

However, this option comes with trade-offs:

  • Higher monthly payments
  • Less payment flexibility during financial hardships
  • Potentially less money available for other financial goals like retirement savings or investments

Consider a 15-year refinance if you can comfortably afford the higher payments, have adequate emergency savings, are on track with retirement savings, and want to be debt-free sooner.

Can I refinance if I have bad credit?

Refinancing with bad credit is challenging but not impossible. Your options may include:

  • FHA Streamline Refinance: If you have an existing FHA loan, this option may not require a credit check or income verification.
  • VA Interest Rate Reduction Refinance Loan (IRRRL): For veterans with VA loans, this option typically has relaxed credit requirements.
  • Working with your current lender: They already know your payment history and may be more willing to work with you.
  • Exploring non-traditional lenders: Some specialize in working with borrowers with credit challenges, though rates may be higher.
  • Adding a co-signer: A co-signer with strong credit might help you qualify for better terms.

If possible, it may be better to improve your credit before refinancing to qualify for better rates and terms. This could involve paying down debt, correcting errors on your credit report, and establishing a solid payment history.