How the refinance calculator works
Enter what you still owe, your current rate and how many years are left, then the new rate, new term and closing costs. The calculator compares your current principal-and-interest payment with the new one and shows the break-even time: closing costs divided by the monthly savings. If you plan to stay in the home longer than that, the refinance usually pays off.
It also compares the interest left on your current loan with the interest on the new loan plus closing costs, because a lower payment is not always a lower total cost.
When does refinancing make sense?
- Rates have dropped – a cut of about 0.5 to 1 percentage point is often enough to beat the closing costs.
- You will stay past the break-even point – if you might move in two years, a long break-even time is a bad sign.
- You want a shorter term – moving from 30 to 15 years raises the payment but can save a lot of interest.
- You want to drop mortgage insurance – refinancing an FHA loan into a conventional loan can end MIP once you have 20% equity.
Be careful with restarting a fresh 30-year loan when you have already paid for many years: the payment falls, but you may pay interest for longer.
Frequently asked questions
How much does it cost to refinance a mortgage?
Closing costs are often 2% to 5% of the loan amount, covering lender fees, appraisal, title insurance and recording fees. Some lenders offer "no-closing-cost" refinances by charging a higher rate instead.
Does refinancing hurt my credit score?
The lender's hard credit check and the new account can lower your score a few points for a short time. Rate-shopping with several lenders within a few weeks usually counts as a single inquiry.
What is a cash-out refinance?
A cash-out refinance replaces your mortgage with a larger loan and pays you the difference in cash. It usually has a slightly higher rate, and you are borrowing against your home, so use it carefully.