Mortgage Refinance Calculator
Compare refinance options to lower payments, shorten the term, or tap home equity.
Mortgage Refinance Calculator
See monthly savings, breakeven timelines, and total interest if you refinance.
Mortgage Refinance Calculator
Current Mortgage
Refinance Loan
Typical: 2-5% of loan amount
Understanding Mortgage Refinancing
Mortgage refinancing means replacing your current home loan with a new one, ideally with better terms—lower interest rate, shorter term, or better monthly payment. When you refinance, you pay off your existing mortgage with a new loan and start making payments on the new mortgage.
The main reasons to refinance include: lowering your monthly payment, paying off your mortgage faster, switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage, tapping into home equity for cash, or consolidating debt. However, refinancing isn't free—closing costs typically range from 2-5% of the loan amount.
The key question is: will you save enough money to justify the closing costs? Use the break-even analysis above to find out. If you plan to stay in your home longer than the break-even period, refinancing likely makes sense.
When Should You Refinance Your Mortgage?
1. Interest Rates Drop (The 1% Rule)
Traditional wisdom says refinance when rates drop at least 1% below your current rate. However, even a 0.5% reduction can be worthwhile if you plan to stay in the home long-term. Lower rates mean lower monthly payments and potentially tens of thousands saved in interest.
2. Your Credit Score Improved Significantly
If your credit score increased by 50+ points since you got your mortgage, you likely qualify for better rates. A jump from 680 to 740+ can reduce your rate by 0.5-1%, saving hundreds per month on a $300,000 mortgage.
3. You Want to Switch Loan Types
Switching from an ARM to a fixed-rate mortgage provides payment stability, especially if rates are rising. Or refinance from a 30-year to a 15-year mortgage to pay off your home faster and save massive amounts on interest (though monthly payments will be higher).
4. You Need to Eliminate PMI
If your home value increased and you now have 20%+ equity, refinancing can eliminate private mortgage insurance (PMI), which costs 0.5-1% of the loan amount annually. On a $300,000 loan, that's $1,500-$3,000/year saved.
5. You Want Cash Out for Major Expenses
Cash-out refinancing lets you borrow against your home equity at mortgage rates (much lower than personal loans or credit cards). Use it for home improvements, debt consolidation, or major expenses—but never for discretionary spending.
6. You Plan to Stay Long-Term
Refinancing only makes sense if you'll stay in the home past the break-even point (when monthly savings offset closing costs). If you're moving within 2-3 years, refinancing likely costs more than it saves.
Refinancing Costs You Should Know
| Fee Type | Typical Cost | Negotiable? |
|---|---|---|
| Appraisal Fee | $300-$700 | Sometimes |
| Origination Fee | 0.5-1% of loan | Yes |
| Title Search & Insurance | $700-$1,500 | Shop around |
| Credit Report Fee | $25-$50 | No |
| Underwriting Fee | $500-$1,000 | Sometimes |
| Recording Fees | $50-$250 | No |
| Attorney Fees | $500-$1,500 | Shop around |
Pro Tip: Total closing costs typically range from 2-5% of the loan amount. On a $300,000 refinance, expect $6,000-$15,000. Some lenders offer "no-closing-cost" refinancing, but this usually means a higher interest rate that costs more over time.
How to Get the Best Refinance Rate
1. Shop Multiple Lenders
Get quotes from at least 3-5 lenders within a 14-day window (counts as one credit check). Rates can vary by 0.25-0.5%, which is thousands in savings over the life of the loan.
2. Improve Your Credit Score First
Wait to refinance until your credit score is 740+. Pay down credit cards, dispute errors, and avoid new credit. A 60-point increase can reduce your rate by 0.5%.
3. Build 20%+ Equity
Lenders offer the best rates when you have 20%+ equity. If you're close, consider paying down principal or waiting for home values to rise before refinancing.
4. Consider Points vs. No Points
Paying discount points (1% of loan = 0.25% lower rate) can save money if you stay long-term. Calculate your break-even point before deciding.
5. Lock Your Rate at the Right Time
Lock your rate when you're confident it won't drop further. Rate locks typically last 30-60 days. If rates fall, ask about a "float down" option.
6. Negotiate Fees
Origination fees, processing fees, and underwriting fees are often negotiable. Use competing offers as leverage to reduce costs.
Frequently Asked Questions
Is it worth refinancing to save 0.5% on interest rate?
It depends on your loan amount, how long you'll stay in the home, and closing costs. A 0.5% rate reduction on a $300,000 mortgage saves about $90/month. If closing costs are $6,000, you'll break even in 67 months (5.5 years). If you plan to stay longer, it's worth it. Use the break-even analysis above to calculate your specific situation.
Should I refinance from a 30-year to a 15-year mortgage?
Yes, if you can afford the higher monthly payments. 15-year mortgages have lower interest rates (typically 0.5-0.75% less) and you'll pay off your home twice as fast. On a $300,000 loan at 7% for 30 years, you pay $418,000 in interest. At 6.25% for 15 years, you pay only $156,000 in interest—a $262,000 savings. However, monthly payments jump from $2,000 to $2,600, so ensure you can afford the increase.
What credit score do I need to refinance?
Minimum is typically 620 for conventional loans, but you'll get the best rates with a score of 740+. Here's how rates vary: 760+ gets prime rates (e.g., 6.5%), 700-759 adds ~0.25% (6.75%), 660-699 adds ~0.5% (7%), and 620-659 adds ~1% (7.5%). Even a small credit score improvement can save thousands in interest.
Can I refinance if my home value decreased?
Possibly, but it's harder. If your home value dropped and you owe more than it's worth (underwater), conventional refinancing is difficult. However, you might qualify for government programs like HARP (Home Affordable Refinance Program) or FHA Streamline Refinance, which allow underwater homeowners to refinance without new appraisals or extensive credit checks. Contact your lender to see if you qualify.
What's the difference between rate-and-term and cash-out refinancing?
Rate-and-term refinancing replaces your mortgage with a new one at a better rate or term, keeping the loan amount roughly the same (minus closing costs). Cash-out refinancing borrows more than you owe, giving you cash from your home equity. For example, if you owe $200,000 but your home is worth $350,000, you could refinance for $250,000, pay off the $200,000 mortgage, and receive $50,000 cash (minus closing costs). Cash-out refis have slightly higher rates due to increased risk.
How long does the refinancing process take?
Typically 30-45 days from application to closing. The process includes: application and rate lock (day 1), home appraisal (7-14 days), underwriting review (14-21 days), final approval (21-30 days), and closing (30-45 days). You can speed it up by providing all required documents promptly, responding quickly to lender requests, and maintaining stable employment and credit during the process.
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