Refinance Calculator
Calculate whether refinancing your mortgage will save you money and find your break-even point.
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About the Refinance Calculator
Refinancing replaces your current mortgage with a new one — usually at a lower rate, sometimes for a shorter term, occasionally to pull cash out of your equity. The question is never just 'are rates lower?' but 'do I save more than I pay in closing costs, and will I stay long enough to enjoy it?'
The Formula
Monthly savings = Old payment − New payment. Break-even months = Closing costs ÷ Monthly savings. If you plan to stay longer than the break-even, refinancing pays off.
Worked Example
Current loan $300,000 at 7.5% with 27 years left = $2,170/month. Refinancing to 6.0% for 30 years = $1,799/month — savings of $371/month. Closing costs $6,000 ÷ $371 = 16 months to break even. If you'll keep the home 5+ more years, refinance.
When refinancing makes sense
Rule of thumb: rates have dropped 0.75% or more, you plan to stay 3+ years, and your credit is at least as strong as when you took the original loan. Also consider refinancing to shorten the term — going from 30-year to 15-year at a lower rate can save a fortune in lifetime interest while raising payments only modestly.
Cash-out refinance vs HELOC
A cash-out refi rolls home equity into a new larger first mortgage. A HELOC is a second, revolving line. Cash-out is better when rates are lower than your existing mortgage and you need a large lump sum. HELOC is better for ongoing smaller draws and when rates are similar to current mortgage rates.
The hidden costs
Closing costs typically run 2-3% of the new loan. Common line items: lender origination, appraisal, title insurance, recording fees, prepaid interest. Some lenders offer 'no-cost' refinance — meaning costs are rolled into the rate, slightly higher than market. Always compare the APR, not just the headline rate.
Common Mistakes
- Refinancing into another 30-year term every few years — you reset the amortization clock and pay decades more in interest.
- Refinancing for a 0.25% rate drop. Closing costs eat the savings unless you keep the loan 7+ years.
- Forgetting that your new loan amount includes rolled-in closing costs, increasing your principal.
- Pulling cash out for non-investment purposes. Home equity used for vacations or cars can be hard to rebuild.
Frequently Asked Questions
Does refinancing hurt my credit?
Temporarily yes — the hard inquiry and new account knock 5-10 points. Recovery is usually 3-6 months.
Can I refinance with the same lender?
Yes, and sometimes they'll waive some fees to retain you. Always get at least two competing quotes first.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.