Refinance Calculator

Introduction

A refinance calculator helps you figure out if replacing your current mortgage with a new one is a good idea. When you refinance, you take out a new loan to pay off your old one, usually to get a lower interest rate, reduce your monthly payment, or change the length of your loan. This tool lets you compare your current mortgage to a new one so you can see how much money you could save each month and over time. It also factors in closing costs, which are the fees you pay to set up the new loan. Sometimes those costs can eat into your savings, so it's important to know your break-even point — the moment when your savings finally outweigh what you spent to refinance. Use this refinance calculator to enter your current loan details and your new loan terms, and you'll get a clear picture of whether refinancing makes financial sense for you.

How to Use Our Refinance Calculator

Enter your current loan details and your new loan terms to see how much you could save by refinancing your mortgage.

Current Loan Balance: Type in the remaining amount you still owe on your mortgage. You can find this number on your most recent mortgage statement.

Current Monthly Payment: Enter the amount you pay each month on your existing mortgage, not including taxes or insurance.

Current Interest Rate: Enter the interest rate on your current home loan as a percentage. This is the rate you agreed to when you first got your mortgage or last refinanced.

Remaining Loan Term: Enter the number of years left on your current mortgage. For example, if you started with a 30-year loan five years ago, enter 25. If you're curious about how extra payments could shorten your current loan instead, try our Mortgage Extra Payment Calculator.

New Interest Rate: Enter the interest rate offered for your new refinanced loan. This is the rate your lender has quoted you.

New Loan Term: Choose the length of your new loan in years. Common options are 15 or 30 years. A shorter term means higher monthly payments but less interest paid over time.

Closing Costs: Enter the total fees you will need to pay to refinance. These typically range from 2% to 5% of your loan amount and may include appraisal fees, origination fees, and title insurance.

What Is Mortgage Refinancing?

Mortgage refinancing means replacing your current home loan with a new one, usually to get a lower interest rate, reduce your monthly payment, or change your loan term. When you refinance, your new lender pays off your old mortgage, and you start making payments on the new loan instead. Homeowners typically refinance when interest rates drop, when their credit score improves, or when they want to switch from a 30-year loan to a shorter term like 15 years.

Why Would You Refinance?

There are several common reasons people refinance their mortgage:

• Lower your interest rate: Even a small drop in your rate — say from 6.5% to 5.75% — can save you tens of thousands of dollars over the life of the loan and lower your monthly payment right away.
• Shorten your loan term: Switching from a 30-year mortgage to a 15-year mortgage means you pay off your home faster and pay far less interest overall, though your monthly payment will usually go up. Use our Mortgage Payoff Calculator to see exactly when you'd be debt-free under different scenarios.
• Cash-out refinance: If your home has gained value, you can borrow more than you currently owe and receive the difference as cash. People often use this money for home improvements, debt consolidation, or other large expenses.
• Remove mortgage insurance: If your home's value has risen enough that your loan-to-value (LTV) ratio is 80% or less, refinancing can eliminate the need for private mortgage insurance (PMI), saving you money each month.
• Switch loan types: You might want to move from an adjustable-rate mortgage (ARM) to a fixed-rate loan for more predictable payments, or vice versa.

Understanding Closing Costs

Refinancing is not free. You will need to pay closing costs, which typically range from 2% to 5% of the new loan amount. These costs include an origination fee, appraisal fee, title insurance, escrow fees, recording fees, and a credit report fee. You can pay these costs upfront out of pocket, or you can roll them into your new loan balance. Rolling them in means you borrow more money and pay interest on those costs over time, which increases the total cost of the loan.

The Break-Even Point

The break-even point is one of the most important numbers to look at when deciding whether to refinance. It tells you how many months it will take for your monthly savings to cover the upfront costs of refinancing. For example, if you pay $5,000 in closing costs and save $150 per month, your break-even point is about 33 months. If you plan to stay in your home longer than that, refinancing makes financial sense. If you plan to move before reaching the break-even point, you could end up losing money.

Discount Points

Discount points are an optional upfront fee you can pay to lower your interest rate. One point equals 1% of the loan amount. For example, on a $250,000 loan, one point costs $2,500. Buying points makes sense if you plan to keep the loan for a long time, because the lower rate will save you more money over the years than what you paid upfront. If you plan to sell or refinance again soon, buying points is usually not worth it.

Loan-to-Value Ratio (LTV)

Your loan-to-value ratio compares your new loan amount to your home's current market value. Lenders use LTV to assess risk. A lower LTV means you have more equity in your home, which often leads to better interest rates and no requirement for mortgage insurance. Most lenders want to see an LTV of 80% or lower. If your LTV is above 80%, you may need to pay PMI on the new loan, which adds to your monthly cost. Understanding your home's value is also important when evaluating rental property investments — our Cap Rate Calculator can help with that analysis.

Tips Before You Refinance

• Check your credit score: A higher score gets you a lower rate. Try to pay down debt and fix any errors on your credit report before applying.
• Compare multiple lenders: Rates and fees vary between lenders. Getting quotes from at least three lenders can save you a significant amount.
• Consider total cost, not just monthly payment: A longer loan term may lower your monthly payment but could cost you more in total interest over time. Understanding the impact of compounding interest is key — our APY Calculator can help you see how rates compound on savings and investments.
• Factor in how long you'll stay: Always calculate the break-even point and compare it to how long you plan to live in the home.
• Watch out for prepayment penalties: Some mortgages charge a fee if you pay off the loan early. Check your current loan terms before refinancing. Our Mortgage Extra Payment Calculator can show you the benefit of making additional payments on your current loan as an alternative to refinancing.
• Think about your other debts: If you're also carrying a car loan, use our Auto Loan Calculator to understand those payments and prioritize where refinancing or extra payments will save you the most.

Frequently Asked Questions

What is a break-even point in refinancing?

The break-even point is the number of months it takes for your monthly savings to pay back the closing costs of refinancing. For example, if closing costs are $5,000 and you save $150 per month, your break-even point is about 33 months. If you plan to stay in your home longer than that, refinancing is likely worth it.

Can I refinance if I owe more than my home is worth?

It is very hard to refinance when you owe more than your home is worth. This is called being "underwater." Most lenders require a loan-to-value (LTV) ratio of 97% or less. Some government programs, like the FHA Streamline or VA IRRRL, may still let you refinance even with high LTV, but options are limited.

What does rolling closing costs into the loan mean?

Rolling closing costs into the loan means adding them to your new loan balance instead of paying them upfront. You won't need cash out of pocket, but your loan amount goes up. This means you pay interest on those costs for the life of the loan, which increases the total amount you pay over time.

How much does refinancing typically cost?

Refinancing usually costs between 2% and 5% of your new loan amount. On a $250,000 loan, that's roughly $5,000 to $12,500. Common fees include the origination fee, appraisal fee, title insurance, escrow fees, recording fees, and credit report fee. You can use the itemized closing costs section in this calculator to enter each fee separately.

What is the difference between a rate-and-term refinance and a cash-out refinance?

A rate-and-term refinance changes your interest rate, loan term, or both without borrowing extra money. A cash-out refinance lets you borrow more than your current balance and take the difference as cash. Cash-out refinancing increases your loan amount and usually comes with a slightly higher interest rate.

How does my credit score affect my refinance rate?

A higher credit score usually gets you a lower interest rate. Lenders see borrowers with high scores as less risky. For example, someone with a 760+ score may get a rate that is 0.5% to 1% lower than someone with a 640 score. That difference can save thousands of dollars over the life of the loan.

Should I refinance from a 30-year to a 15-year mortgage?

Switching to a 15-year mortgage means you pay off your home faster and save a lot on interest. However, your monthly payment will be higher. Use this calculator to compare both options. If you can comfortably afford the higher payment, a 15-year loan usually saves you the most money overall.

What is the difference between the two input modes in this calculator?

The "remaining balance" mode lets you enter the amount you still owe and your current monthly payment directly. The "original loan details" mode calculates your remaining balance for you based on your original loan amount, interest rate, loan term, and how many years are left. Use whichever mode matches the information you have available.

What is an ARM loan and should I refinance into one?

ARM stands for adjustable-rate mortgage. The interest rate stays fixed for a set period (like 5, 7, or 10 years) and then adjusts each year based on the market. ARMs often start with a lower rate than fixed loans. They can be a good choice if you plan to sell or refinance again before the fixed period ends. If you plan to stay long-term, a fixed-rate loan is usually safer.

What does PITI mean in the results?

PITI stands for Principal, Interest, Taxes, and Insurance. It represents your full monthly housing payment. This calculator compares your current PITI to your new PITI so you can see the true difference in your monthly cost, not just the principal and interest portion.

How long does the refinance process take?

Refinancing typically takes 30 to 45 days from application to closing. The process includes a credit check, home appraisal, underwriting, and final paperwork. Some lenders offer faster timelines, but delays can happen if there are issues with the appraisal or your documentation.

Is it worth refinancing for a 1% lower rate?

In many cases, yes. A 1% drop on a $250,000 loan can save you around $150 or more per month. The key is comparing your monthly savings to your closing costs. Use this calculator to check your break-even point. If you'll stay in your home past that point, a 1% rate drop is usually worth it.

What happens to my escrow account when I refinance?

When you refinance, your old escrow account is closed and any remaining balance is refunded to you, usually within 30 days. Your new lender will set up a new escrow account and may require an initial deposit to cover upcoming property tax and insurance payments.

Can I refinance if I just bought my home?

Most lenders require you to wait at least 6 months after closing before you can refinance. Some loan programs, like FHA Streamline, require you to have made at least 6 monthly payments. Waiting also gives you time to build some payment history, which can help you qualify for better terms.

What does the amortization schedule show me?

The amortization schedule shows a year-by-year breakdown of your loan payments. It shows how much of each year's payments go toward principal (paying down your balance) and how much goes toward interest. This calculator shows amortization tables for both your current loan and the new refinanced loan so you can compare them side by side.