Refinance Calculator
Should you refinance? Compare your current loan to a new one, calculate your break-even point, and see exactly how much you could save.
Current Loan
Enter your existing mortgage or loan details
≈ 25 years
New Loan (Refinance)
Enter the terms of the refinanced loan
Typically 2-5% of loan amount
Extra cash to take out (optional)
How Long Will You Stay?
This affects whether refinancing makes sense for you
What is Mortgage Refinancing?
Refinancing means replacing your current mortgage with a new one, typically to get a lower interest rate, reduce your monthly payment, change your loan term, or access your home's equity (cash-out refinance).
Rate-and-Term Refinance
The most common type. You replace your existing mortgage with a new one that has a different interest rate, loan term, or both. The loan amount stays roughly the same (just your current balance plus closing costs if rolled in).
Cash-Out Refinance
You borrow more than you currently owe and receive the difference in cash. This taps into your home equity for renovations, debt consolidation, or other needs. The new loan amount is higher than your current balance.
Understanding Break-Even Point
The break-even point is the most critical number in refinancing decisions. It tells you how long it takes for your monthly savings to cover the closing costs.
Break-Even Formula
Break-Even (months) = Closing Costs ÷ Monthly SavingsExample:
Closing costs: $6,000
Monthly savings: $200
Break-even: $6,000 ÷ $200 = 30 months (2.5 years)
What's a Good Break-Even Point?
Excellent - Strong case to refinance
Good - Worth it if staying long-term
Risky - May not pay off
When Should You Refinance?
Good Reasons to Refinance
- ✓Interest rates dropped 0.5% or more - The traditional rule of thumb, though modern low closing cost options have changed this
- ✓Your credit score improved significantly - Better credit can qualify you for much lower rates
- ✓You want to shorten your loan term - 30-year to 15-year can save massive interest
- ✓You need to lower your monthly payment - Extending term or lowering rate helps cash flow
- ✓You want to switch from ARM to fixed - Lock in before adjustable rate increases
- ✓You can eliminate PMI - If you now have 20%+ equity
When NOT to Refinance
- ✗You're moving soon - Won't stay long enough to break even
- ✗You've had your loan a long time - Most interest is paid early; late refinance resets this
- ✗Current loan has prepayment penalty - Could wipe out savings
- ✗Your home value dropped - May not qualify or may need PMI
- ✗Closing costs are too high - Some lenders charge excessive fees
- ✗You're extending term significantly - May pay more interest overall
Understanding Closing Costs
Refinance closing costs typically range from 2-5% of the loan amount. These costs directly impact your break-even point and overall savings.
| Cost Type | Typical Range | Notes |
|---|---|---|
| Application Fee | $75-$500 | Some lenders waive this |
| Appraisal Fee | $300-$700 | Required to verify home value |
| Title Search & Insurance | $700-$1,500 | Protects against title issues |
| Origination Fee | 0.5-1% of loan | Lender's processing fee |
| Discount Points | 0-2% of loan | Optional - buy down rate |
| Recording Fees | $25-$250 | Government filing fees |
| Attorney Fees | $500-$1,000 | Required in some states |
Pro Tip: No-Closing-Cost Refinance
Some lenders offer "no closing cost" refinancing where they roll the costs into your rate (slightly higher rate) or loan balance. This can make sense if you're unsure how long you'll stay, as you break even immediately.
Frequently Asked Questions
How much does it cost to refinance a mortgage?
Typically 2-5% of the loan amount, or $4,000-$10,000 on a $200,000 mortgage. Costs vary by lender, location, and loan type. Always compare loan estimates from multiple lenders.
Should I pay points to lower my rate?
Paying discount points (1 point = 1% of loan amount = ~0.25% rate reduction) makes sense if you'll stay long enough to break even. Calculate whether the upfront cost is worth the monthly savings over your expected stay.
Can I refinance with bad credit?
Yes, but your options are limited and rates will be higher. FHA Streamline refinances don't require credit checks for existing FHA loans. For conventional loans, you typically need a 620+ credit score.
How long does refinancing take?
Typically 30-45 days from application to closing, though it can be faster with some lenders. The process includes application, appraisal, underwriting, and closing.
Will refinancing hurt my credit score?
Temporarily, yes. The hard inquiry and new account can lower your score 5-10 points. However, scores typically recover within a few months, and multiple mortgage inquiries within 14-45 days count as one inquiry.