Should You Refinance? Find Out in Seconds
Refinancing replaces your current loan with a new one at a better rate or term. Done right, it can save you thousands in interest and lower your monthly payment. Done wrong, it can extend your debt and cost more overall. This calculator shows both sides so you can decide with real numbers.
What This Calculator Does
Enter your current loan balance, current rate, current monthly payment, and the refinance offer (new rate, term, closing costs). The calculator returns:
- New monthly payment
- Monthly savings
- Break-even point (how many months until you recoup closing costs)
- Lifetime interest savings or cost
When Refinancing Makes Sense
- Your credit score has improved by 50+ points since the original loan
- Current market rates are at least 0.75% lower than your rate
- You want to shorten your term (e.g., 30-year to 15-year)
- You want to lower your monthly payment (usually by extending the term)
- You want to remove PMI after reaching 20% equity
- You want to switch from an adjustable-rate to a fixed-rate loan
Worked Example: $300,000 Mortgage Refinance
| Current Loan | Refinanced Loan | |
|---|---|---|
| Balance | $300,000 | $300,000 |
| Rate | 7.0% | 5.5% |
| Term | 30 years | 30 years |
| Monthly P&I | $1,996 | $1,703 |
| Total Interest | $418,000 | $313,000 |
| Closing Costs | ā | $6,000 |
| Monthly Savings | ā | $293 |
| Break-even | ā | 21 months |
After 21 months, the refinance pays for itself. Over 30 years, you save over $100,000.
Refinance Closing Costs
Refinancing is not free. Expect to pay 2-5% of the loan amount in closing costs:
- Application fee: $75-$500
- Loan origination: 0.5%-1% of loan
- Appraisal: $300-$700 (mortgage only)
- Title search and insurance: $400-$900
- Credit report: $25-$50
- Recording fees: $50-$200
Many lenders offer "no-cost refinance" - but they recover costs through a slightly higher rate. Compare total costs carefully.
The Break-Even Rule
Divide your total closing costs by your monthly savings. That is the number of months you must stay in the loan to break even.
Example: $6,000 costs ÷ $293 savings = 21 months. If you plan to stay longer than 21 months, refinancing is worthwhile.
Cash-Out vs Rate-and-Term Refinance
Rate-and-term refinance: You lower your rate or change your term without taking cash out. Simple, straightforward.
Cash-out refinance: You borrow more than your current balance and pocket the difference. Useful for debt consolidation, home improvements, or major expenses - but you increase your loan balance.
Frequently Asked Questions
How often can I refinance?
No legal limit, but most lenders require you to have made at least 6 payments on the current loan. Refinancing too often reduces your savings.
Does refinancing hurt my credit?
There is a small temporary dip from the hard inquiry. Multiple refinance inquiries within 14 days count as one. Long term, refinancing can improve credit if you pay on time.
How much does it cost to refinance?
Typically 2-5% of the loan amount. On a $300,000 mortgage, expect $6,000-$15,000, though some can be rolled into the new loan.
Is now a good time to refinance?
If current rates are at least 0.75% below your existing rate and you plan to stay in the loan past break-even, it is a good time.
Can I refinance with bad credit?
Yes, but rates will be higher. Improving your score first (usually above 640) is recommended.
What is a streamline refinance?
FHA, VA, and USDA offer streamlined refinances with lower paperwork and no appraisal for existing borrowers. Fast and cheap.