Mortgage Refinancing Calculator
Refinancing replaces your existing mortgage with a new loan, ideally at a lower interest rate. This can reduce your monthly payment, decrease total interest paid, or shorten your loan term. The key question is whether the savings justify the closing costs, which typically run 2-6% of the loan amount.
The break-even point tells you how many months until savings offset closing costs. If you plan to stay in your home longer than the break-even period, refinancing makes financial sense. For example, if closing costs are $5,000 and you save $200 monthly, you break even in 25 months. Any savings beyond that point is money in your pocket.
Besides rate reduction, refinancing can switch loan types (ARM to fixed or vice versa), remove PMI if your home value increased, or consolidate debt through cash-out refinancing. However, resetting to a new 30-year term means paying more total interest even with a lower rate if you've already paid down substantial principal. Consider refinancing to a shorter term if you can afford higher payments.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
When you can lower your rate by at least 0.5-1%, you plan to stay in the home past the break-even point, or your credit has improved significantly. Also consider refinancing to eliminate PMI or switch loan types.
Typically 2-6% of loan amount, including appraisal, title search, application fees, and origination fees. Some lenders offer no-closing-cost refinancing but charge higher interest rates to compensate.
Cash-out refinancing borrows against home equity to get cash. Good for home improvements that add value, consolidating high-interest debt, or major expenses. Avoid using it for vacations or depreciating purchases.
Typically 30-45 days from application to closing. Requires income verification, credit check, and home appraisal. Having documents ready (pay stubs, tax returns, bank statements) speeds the process.
Possible but challenging. Lenders typically require 620+ credit score for conventional refinancing. FHA streamline refinancing may accept lower scores. Improving credit before applying yields better rates and more options.