Mortgage Refinance Calculator

Refinancing costs money up front. The question is not whether the new rate is lower - it almost certainly is, or you would not be considering it - but whether you will stay in the loan long enough for the monthly saving to repay the cost of switching.

If you expect to sell or refinance again within the break-even window, the move costs money rather than saving it. Two years in the home with a 30-month break-even is a loss.

Note. Ask the lender for a loan estimate in writing. Closing costs on a refinance typically run 2-5% of the new loan amount and include appraisal, title, origination and recording fees. Roll them into the loan and the balance rises - which also raises the payment, partially undoing the saving.

A lower rate and a shorter term are often confused as the same kind of saving. They are not, and the difference matters for how long you stay.

The 30-year refinance lowers the payment and saves interest only if you do not extend the total time you spend in debt. If you have already paid 8 years on the original loan and restart a 30-year term, you are committing to 38 years of payments from the original purchase - which can cost more overall despite the lower rate.

The 15-year option raises the payment but cuts total interest by roughly 60% versus the 30-year refinance. Whether that is available depends on whether the higher payment survives your budget.

A cash-out refinance replaces the mortgage with a larger one and pays you the difference in cash. It converts home equity into spendable money - and into new debt secured on your house.

• The rate applies to the whole balance, including the cash you took out. If equity is borrowed at mortgage rates to fund something that earns less, that is a drag.
• Lenders cap loan-to-value, commonly at 80% of the value. Borrowing beyond that requires a higher rate or private mortgage insurance.
• Using it for home improvements can be defensible - the work may raise the property value, and the borrowing rate is usually far below unsecured alternatives.
• Using it to clear high-interest debt saves interest only if the cards are not re-run. Consolidating $20,000 of card debt at 21% into a mortgage at 5.75% is a large saving - until the cards are maxed again and the house now secures that debt too.
• Extending the term means the old balance is re-amortised over 30 more years, so you may pay more interest on the part you already owed.

1. You are selling soon. Any break-even longer than your expected stay is a certain loss.
2. You are close to payoff. The remaining interest is already small and front-loaded payments are behind you. Restarting resets that curve.
3. The costs are rolled into the balance. You are paying interest on the closing costs for the life of the loan.
4. You take a longer term without a plan. A lower payment achieved only by extending time is not a saving, it is a reduction in monthly burden at a higher total cost.
5. Your credit has changed. The advertised rate assumes a strong profile. A refinance that triggers a rate tier you do not qualify for can erase the benefit.
6. You are in a low-rate loan already. Obvious, but worth stating: if your current rate is already competitive, the calculation usually fails on closing costs alone.

1. Get the loan estimate first, and compare two or three lenders on the same day - rates change daily.
2. Count every cost, including points, and whether points are worth paying depends on how long you stay.
3. Compare like with like. Hold the term constant when testing the rate, and test the term separately.
4. Model the break-even against your actual plans rather than an assumed 30-year stay.
5. Recalculate if anything changes - a new quote, a changed credit score, or a revised move date can all flip the answer.