Refinance Calculator
Refinance Calculator
Calculate if refinancing your mortgage will save you money
Current Loan
New Loan
Additional cash you want to take out
Refinance Calculator: Complete Mortgage Analysis
Mortgage refinancing replaces your current loan with a new one, potentially at better terms.Refinancing can lower your monthly payments, reduce total interest costs, change loan terms, or provide cash from your home equity. This calculator analyzes all financial aspects to determine if refinancing benefits your specific situation.
This calculator provides analysis including monthly savings, break-even calculations, closing cost recovery, total lifetime savings, and recommendations based on current market rates and your financial profile.
Quick Answer
To determine if refinancing saves money: Compare your current monthly payment to the new payment, calculate how long it takes to recover closing costs (break-even point), and analyze total interest savings. Refinancing typically makes sense if you save at least 0.5-1% on interest rates and plan to stay in your home beyond the break-even period.
Benefits of Refinancing
Lower Monthly Payments
Reduce monthly housing costs by securing a lower interest rate or extending loan term.
Rate reduction: 6.5% → 5.5% can save $200-400/month on $300k loanShorten Loan Term
Pay off your mortgage faster and save thousands in total interest.
30-year to 15-year: Save 15 years, reduce total interest by 50-60%Cash-Out Refinancing
Access home equity for improvements, debt consolidation, or investments.
Example: $400k home, $200k mortgage → borrow $280k, get $80k cashWhen Should You Refinance?
Rate Environment
✓ Good Time to Refinance
- • Rates dropped 0.5-1% or more since origination
- • Credit score improved significantly
- • Home value increased substantially
- • Current loan has PMI you can eliminate
✗ Poor Time to Refinance
- • Rates higher than current mortgage
- • Planning to move within 2-3 years
- • Credit score decreased significantly
- • Home value declined below loan balance
Financial Considerations
Break-Even Analysis
Calculate months to recover closing costs: Closing Costs ÷ Monthly Savings = Break-Even Months
Closing Cost Impact
Typical costs: 2-5% of loan amount. Include appraisal, title, origination, and processing fees
Time Horizon
Stay in home longer than break-even period. Consider job stability and family plans
Types of Mortgage Refinancing
Rate-and-Term Refinance
Changes interest rate, loan term, or both without taking cash out.
Cash-Out Refinance
Borrow more than owed on current mortgage and receive difference in cash.
Streamline Refinance
Simplified refinancing for government loans (FHA, VA, USDA) with reduced documentation.
Refinancing Examples with Analysis
Example 1: Rate Reduction Refinance
Current: $300k balance, 6.5% rate, $1,896/month, 25 years remaining New: 5.5% rate, 30-year term, $3,000 closing costs
Recommendation: Refinance - breaks even in 16 months with substantial monthly savings
Example 2: Cash-Out Refinance for Home Improvement
Current: $200k balance, 6.0% rate on $400k home Goal: Take $50k cash for renovations, new rate 5.75%
Analysis: Good option if renovations add $50k+ home value and improve quality of life
Example 3: Term Shortening Strategy
Current: $250k balance, 6.0% rate, 27 years remaining Goal: Refinance to 15-year term at 5.25%
Strategy: Ideal for higher income, debt-free retirement goals, significant interest savings
Refinancing Costs and Fees
Typical Closing Costs
Cost Reduction Strategies
Cost vs. Benefit Analysis
- • Calculate total closing costs including all fees and taxes
- • Consider opportunity cost of cash used for closing costs
- • Factor in tax implications of mortgage interest deduction
- • Evaluate prepayment penalties on current mortgage
- • Compare refinancing vs. making extra principal payments
Market Timing and Rate Environment
Rate Trends and Timing
Falling Rate Environment
Strategy: Time refinancing after significant drops
Advantage: Lock in lower rates before potential increases
Risk: Missing additional drops by refinancing too early
Rising Rate Environment
Strategy: Refinance quickly if beneficial
Advantage: Secure rates before further increases
Risk: May miss temporary rate dips
Economic Factors
Federal Reserve Policy
Monitor Fed rate decisions and forward guidance. Mortgage rates generally follow but don't match exactly.
Economic Indicators
Watch inflation, employment, GDP growth. Strong economy often leads to higher rates.
Credit Market Conditions
Lender appetite, regulatory changes, and investor demand affect mortgage availability and pricing.
Refinancing Qualification Requirements
Credit and Income
- Credit Score: 620+ for conventional, 580+ for FHA
- Debt-to-Income: 43% maximum for most programs
- Employment: 2+ years stable employment history
- Assets: Reserves for closing costs and cash reserves
Property and Equity
- Loan-to-Value: 80% max for cash-out, 97% for rate/term
- Appraisal: Current market value assessment required
- Property Type: Primary residence preferred rates
- Payment History: No late payments in 12 months
Frequently Asked Questions
How much can I save by refinancing?
Savings depend on rate reduction and loan size. A 1% rate drop on a $300k loan typically saves $200-300/month. Total lifetime savings can range from $20k-100k+ depending on loan amount, rate differential, and remaining term. Use this calculator to analyze your specific situation.
When is the best time to refinance?
Refinance when you can reduce your rate by 0.5-1% or more. Other good times include when your credit improves significantly, home values increase, or you want to change loan terms. Avoid refinancing if you're moving within 2-3 years or rates have increased since your current loan.
How long does the refinancing process take?
Typical timeline is 30-45 days from application to closing. Rate-and-term refinances are often faster than cash-out refinances. Streamline refinances for government loans can close in 15-30 days. Delays can occur due to appraisal issues, documentation requirements, or high lender volume.
Should I pay points to get a lower rate?
Points make sense if you'll stay in the home long enough to break even. Each point typically costs 1% of the loan amount and reduces the rate by 0.25%. Calculate the monthly savings vs. upfront cost. Generally beneficial if you'll keep the loan 5+ years.
What's the difference between a refinance and home equity loan?
Refinancing replaces your current mortgage; home equity loans add a second loan.Refinancing typically offers lower rates and may provide better terms. Home equity loans are faster and don't affect your current mortgage rate. Choose based on rates, costs, and your financial goals.
Can I refinance with bad credit?
Refinancing with poor credit is possible but challenging. FHA loans accept scores as low as 580, VA loans are more flexible for veterans. Expect higher rates and stricter requirements. Consider improving credit first or exploring government programs before refinancing.
What happens to my escrow account when I refinance?
Your current escrow account closes and you'll get a refund within 30 days.The new lender will establish a new escrow account and may collect several months upfront. Budget for this temporary cash flow impact. You can often request to waive escrow if you have 20%+ equity.
Advanced Refinancing Strategies
Debt Consolidation Strategy
Use cash-out refinancing to pay off high-interest debt:
Best for borrowers with good payment discipline and substantial high-interest debt.
Investment Property Strategy
Cash-out refinance to fund investment properties:
Requires careful analysis of rental income potential and market conditions.
Education Funding Strategy
Refinance to fund education expenses:
Compare carefully with federal student loans and education-specific benefits.
Related Mortgage Tools
Refinance Calculator
Calculate if refinancing your mortgage will save you money
Current Loan
New Loan
Additional cash you want to take out