Refinance Calculator
Refinancing replaces your mortgage with a new one, ideally at a lower rate, a shorter term, or both. The catch is that closing costs are real money, so the only question that matters is how long it takes for the monthly savings to pay them back.
Your current loan and the new offer
Shorter terms usually price lower than 30-year terms.
Typically 2% to 5% of the loan amount. Ask for a Loan Estimate to get the real number.
Total cost over the same horizon
Comparing total interest on a 27-year loan against a 30-year loan is misleading, because the longer loan simply runs longer. The fair comparison is what you have paid plus what you still owe after 27 years, the point where the shorter of the two loans ends.
Keep the current loan
Refinance
Rolling closing costs into the loan raises the balance and the total interest. Paying them out of pocket keeps the loan smaller but requires the cash upfront. Also check whether restarting the clock matters. If you are 20 years into a 30-year loan, a new 30-year term stretches the payoff far into the future even when the payment drops.
New rate is 6.25% against a current rate of 7.25%, a difference of 1.00%.
The break-even point is the whole decision
Divide your total closing costs by your monthly savings to get the break-even month. If you plan to stay in the home longer than that, refinancing usually wins. If you might sell or move before then, you will lose money on the deal.
The two ways to refinance
A rate-and-term refinance lowers your interest rate, changes the loan length, or both. A cash-out refinance replaces your mortgage with a larger one and hands you the difference in cash, usually at a slightly higher rate.
Cash-out refinancing can be useful for consolidating high-interest debt, but it moves unsecured debt onto your home. If something goes wrong, the consequence is foreclosure rather than a late fee.
Watch the clock, not just the payment
Restarting a 30-year term can lower your payment while costing far more in total interest. If you are 12 years into a 30-year loan and refinance into a new 30-year loan, you have stretched an 18-year remaining obligation into 30 years.
Compare total interest remaining on the old loan against total interest on the new one, not just the monthly payment. A shorter term with a modestly lower rate is often the strongest combination.
Frequently asked questions
What closing costs should I expect?
Typically 2 to 5 percent of the loan amount. On a $350,000 loan that is $7,000 to $17,500, covering appraisal, title insurance, origination fees, recording fees and prepaid escrow items.
Does refinancing hurt my credit score?
There is a small, temporary dip from the hard inquiry, usually under five points. Rate shopping within a focused window, generally 14 to 45 days depending on the scoring model, counts as a single inquiry.
Can I refinance with less than 20 percent equity?
Yes. Conventional refinances need roughly 5 percent equity, FHA streamline refinances need less, and VA loans can go to 100 percent. Expect PMI or a funding fee if you are under 20 percent.
Is a no-closing-cost refinance actually free?
No. The lender covers the costs in exchange for a higher interest rate, or by adding the costs to your loan balance. You pay for it either way. The question is whether the higher rate costs you more than paying upfront would.
This calculator is an educational tool and does not constitute financial, tax or legal advice. Results are estimates based on the inputs and assumptions described above. Verify important figures with a qualified professional or the relevant government agency before acting on them.