Mortgage Refinance Calculator: Should You Refinance?

Refinancing is usually worth it if it saves you money over the life of your loan. Use this mortgage refinance calculator to estimate how much a new loan could save you.

Keep in mind that the calculator provides an estimate only; your new monthly payment may be different from what’s shown.

To get a more accurate number, request estimates from lenders so you can see how low of a rate and payment you qualify for.

Check your refinance rates today (Oct 28th, 2020)

Step 1. Enter your current mortgage information.

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Step 2. Enter your new mortgage information.

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Step 3. Compare results.

Monthly Payment

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Remaining Interest

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Remaining Total

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Mortgage Payoff Date

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Next Steps: Talk to a refinance Lender and lock in your rate!

Based on your inputs, we recommend the following lenders:

Should I refinance my mortgage?

Are you trying to decide whether to refinance your remaining mortgage loan amount?

Here’s a look at some of the most common reasons to consider refinancing.

Lower your interest rate

Getting a lower interest rate is by far the most popular reason to refinance a mortgage.

If today’s rates are lower than the rate on your current loan, refinancing could substantially reduce your monthly mortgage payments. A refinance could also help you save thousands of dollars in interest over the life of your loan.

Switch your mortgage type

Refinancing gives you a chance to choose a different loan type. Your new loan can reflect your current financial life instead of reflecting your needs as they were when you took out the original mortgage.

For example, if you have an adjustable-rate mortgage (ARM) and the interest rate is about to increase, you can change to a more stable fixed-rate mortgage.

Or if you have an FHA loan and you want to stop paying mortgage insurance, you may be able to refinance to a conventional loan that does not require private mortgage insurance.

Borrowers can also choose a shorter mortgage term when they refinance.

Replacing a 30-year mortgage with a 15-year loan, for example, can save a lot in interest. But keep in mind that a shorter loan term results in higher monthly payments.

Pay off your loan faster

In most cases, shortening your mortgage term will allow you to pay the loan off faster.

A shorter term often means you’ll have a higher monthly payment. But you’ll likely pay less interest over the life of your loan because you are making fewer payments.

And shorter loan terms, like a 15-year fixed, usually offer lower interest rates than a longer-term loan.

If the payments on a shorter loan term are too high for your budget, there are other ways to pay off your mortgage early.

For instance, you might refinance to a better interest rate and lower your monthly payments. Then, you can take the money you’re saving and use it to “prepay” your mortgage by paying a little extra each month. This way, you’ll pay the principal off faster and save money on interest in the long run. 

Cash-out your home equity

If you have enough equity in your home, you may be able to do a cash-out refinance.

With a cash-out refinance, your new loan amount is higher than your current mortgage balance. The bigger loan amount is first used to pay off your existing loan, and the ‘extra’ is returned to you as cash.

Funds from a cash-out refinance can be used for anything, but some of the best uses include home improvements, debt consolidation, paying for college education, or buying another property.

Refinance calculator terms and definitions 

To get the most precise estimates from our mortgage refinance calculator, you’ll need some information about your current mortgage and your potential new loan.

Below are the key pieces of information you’ll need and where to find them.

Current loan balance: Refers to the remaining principal balance on your existing loan. This can be found on your latest mortgage statement.

Current monthly payment: Includes only the payments you make toward principal and interest each month. If your monthly payment also goes toward escrow (to cover taxes and insurance), you should check with your mortgage lender to determine the exact portion that goes toward principal and interest. Your statement should also show this breakdown.

Interest rate: The amount you pay each year to borrow money from your lender. To use a refinance calculator, you’ll need both your current loan’s interest rate and your expected new interest rate. If you’re not sure what rate your new loan may carry, you can get an estimate here.

Loan term: The loan term is how long your mortgage loan lasts. Usually, refinancing to a 30-year loan will lower monthly payments the most. If your goal is to pay off your loan sooner, you may want a loan with a shorter mortgage term.

Estimated closing costs: You’ll pay closing costs to refinance your mortgage, just as you did with the initial loan. These vary by mortgage lender but usually come out to around 2 to 5 percent of your total loan balance.

Closing costs typically include loan origination fees, appraisal fees, and legal fees, as well as prepaid interest, taxes, and insurance.

How to decide if refinancing is worth it

So, is refinancing worth it? Generally, a refinance is worthwhile if you’ll be in the home long enough to reach the “break-even point” — the date at which your savings outweigh the closing costs you paid to refinance your loan.

For example, let’s say you’ll save $200 per month by refinancing, and your closing costs will come in around $4,000. In order to make this refinance scenario worth it, you’ll need to be in the home at least 20 months to hit your break-even point and make up that $4,000.

If you plan to stay in the home at least that long, then a refinance is most certainly worth it. Each month you’re in the loan beyond your break-even point adds to your total savings.

  • Monthly savings: $200
  • Refinance closing costs: $4,000
  • Time to break even: $4,000 / $200 = 20 months

Another common way to think about refinance costs is the “two-year rule.”

The two-year rule says that, generally, the interest you save over the first two years should be equal to or more than your total refinance closing costs.

Use the “two-year rule” when refinancing into a shorter loan term. You likely won’t save money monthly by converting your 30-year loan into a 15- or 10-year one. But you will save a ton in interest.

5 questions to ask yourself before refinancing your mortgage

Determining your break-even point isn’t the only way to decide whether to refinance.

You should also ask yourself the following questions to gauge whether a new loan is the right move for you:

1. How much equity do you have in your home?

Your equity is the portion of your home value that you already own. If your house is worth $200,000 and you owe $175,000 on your existing mortgage, your equity would be $25,000, or 12.5%.

If you have at least 20% equity in your home, you may be able to remove private mortgage insurance or FHA mortgage insurance with a refinance. This will lower your payment even further and add to your overall savings.

For a cash-out refinance you typically need to have substantial equity, because lenders will require you to leave at least 20% of the home’s value untouched.

2. What’s your credit score?

You don’t need perfect credit to refinance, but your credit score will play a role. The better your score, the better your interest rate will be — and the more you’ll stand to save.

Here are the typical minimum credit score requirements for major refinance programs:

  • Conventional refinance — 620
  • Conventional cash-out refinance — 620
  • Jumbo loan refinance — 660-700
  • FHA refinance — 580
  • FHA cash-out refinance — 600
  • FHA streamline refinance — No credit check required
  • VA cash-out refinance — 620
  • VA IRRRL —  No credit check required

Keep in mind, credit score requirements vary by lender. So if your current lender says your score is too low to refinance, you may have better luck with another.

3. How long will you be in the home?

Before you consider a refinance, you should have at least a rough idea of how long you plan to be in the home. If you’re not sure, or if you expect changes in your job or living situation in the near future, a refinance might not be wise.

4. What’s your refinance goal?

Lowering your rate and current monthly payment are just two of the things you can do with a refinance. Refinancing can also help you shorten your loan term and pay off your mortgage sooner.

Or you can use the new loan to tap home equity for home improvements or to pay off higher-interest debts. Home improvements can add to your home value, enhancing your real estate investment even more.

5. What does your current loan look like?

Before choosing to refinance, you should have a good ideaof how much you owe on your existing loan and how long it would take you to pay off the balance.

If you’ve almost paid off your current loan, you could wind up paying more in total interest payments by resetting your balance with a refinance — even at today’s rates.

For instance, if you’re 8 years into a 30-year loan, consider refinancing into a 20-year loan. You could potentially shave a couple years off of your loan and reduce your payment.

Also, check to see if your current lender charges prepayment penalties. These fees would add to your total costs, eating into your savings as well.

Always shop around for the best refinance rate

If you want to maximize your mortgage refinance savings, you’ll have to shop around first.

We recommend getting quotes from at least three lenders, and comparing each of these on interest rate, closing costs, and other terms.

Ready to lock in a lower rate?

Verify your new rate (Oct 28th, 2020)