Mortgage Refinance Calculator
Compare your current mortgage with new refinance options to see potential monthly savings and when you would break even.
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New Refinance Loan
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Refinancing Guidelines
When Should You Refinance?
Refinancing involves replacing your current mortgage with a new one. It is traditionally performed for three major reasons: to secure a lower interest rate, to remove Private Mortgage Insurance (PMI), or to access equity via a "cash-out" refinance.
As a general rule of thumb, experts suggest exploring a refinance if market interest rates are at least 0.5% to 1.0% lower than your current fixed rate, provided you plan to stay in the home long enough to recoup your closing costs.
Understanding the Break-Even Point
Refinancing is not free. You will pay closing costs (typically 2% to 6% of the loan amount), which can include origination fees, appraisal fees, and title insurance. The critical metric is your Break-Even Point:
Break-Even (Months) = Total Closing Costs / Monthly Savings
If your closing costs are $4,000 and the refinance saves you $200 per month, your break-even point is 20 months. If you plan to sell the house in 12 months, refinancing would lose you money.
Eliminating PMI
If your initial loan required PMI (e.g., you put less than 20% down on a conventional loan), and your home's value has risen significantly or you have paid down your principal, a refinance can allow you to drop the PMI altogether if your new loan-to-value (LTV) ratio drops below 80%.
Refinance FAQs
When makes sense to refinance?
A common rule of thumb is that refinancing makes sense if you can lower your interest rate by at least 0.75% to 1%, allowing you to recover closing costs rapidly. However, it also makes sense if you need to switch from an adjustable to a fixed-rate loan, or if you want to tap into your home equity via a cash-out refinance for home repairs or debt consolidation.
Does refinancing hurt my credit score?
When lenders check your credit during the application process, it results in a "hard inquiry," which can temporarily lower your credit score by a few points. However, this dip is usually minor, and successfully making payments on your new, potentially more affordable loan will help rebuild and maintain a strong credit profile over time.
Can I refinance with bad credit?
It's more difficult but not impossible. Certain government-backed loans, like FHA Streamline Refinance programs, VA Interest Rate Reduction Refinance Loans (IRRRL), and USDA streamlined programs are designed to help borrowers refinance even with lower credit scores. Conventional refinances generally require higher minimum credit tiers.
What are typical refinance closing costs?
Refinance closing costs generally range between 2% and 6% of the overall loan amount. These fees cover origination fees, appraisal fees, title searches, title insurance, and credit report fees. You will either pay these costs out-of-pocket at closing, or the lender may allow you to roll them into the total loan balance.
Is it worth refinancing just to remove PMI?
Yes, but only if the interest rate you are getting on the new loan is roughly equal to or lower than your current rate. Since PMI can cost hundreds of dollars a month, dropping it yields direct savings. Just make sure to calculate that those monthly savings will quickly surpass the closing costs of the refinance.
Important Educational & Compliance Disclaimer
The information provided on this page is for educational and informational purposes only. It does not constitute financial advice or an offer of a mortgage or refinance product. Refinancing may increase the total number of monthly payments and the total amount paid when comparing it to your original loan constraint. Please consult with your licensed loan originator or financial planner before proceeding with a refinance.