Mortgage Refinance Calculator
When you refinance your mortgage, you replace your current home loan with a new one that has better terms for your financial situation. Our calculator can show you how refinancing could change your monthly payment and how much you’ll pay in total interest. Your potential savings will depend on the actual terms of your new mortgage – but we can help you explore your options.
Payment information is not a determination of eligibility. This calculator is provided for estimation purposes only, and is based on your self-reported information and aggregate national averages.
How To Use Our Mortgage Refinance Calculator
To use our refinance calculator, you’ll be asked to input these details about your current mortgage:
- The current market value of your home
- The remaining balance on your mortgage
- Your interest rate
- Your loan type
- The month and year that you took out your current loan
Then, you’ll enter these details about the projected terms of your refinance:
- The new interest rate
- Your preferred loan type
- The amount of home equity you’d like to cash out, if any
Using this information, our calculator can estimate your new monthly mortgage payment and calculate the changes to your monthly payment and overall mortgage costs after refinancing. You’ll also receive estimates of your closing costs and how long it will take you to recover them, based on the monthly savings from refinancing.
Below this breakdown, our calculator will provide a line chart that shows your projected savings from refinancing – or additional spend – over time.
Ready To Refinance?
Get matched with a lender that can help you reach your financial goals.
Why Refinance Your Mortgage
Refinancing can be a way to save money or tap into the equity you’ve built in your home to borrow money. Here are some common reasons why homeowners refinance:
- Lower monthly payments. You could make your mortgage payments more affordable by extending your repayment period, refinancing to a lower interest rate or both.
- Pay off the mortgage faster. You may want to shorten your repayment period to fully own your home sooner. This reduces the total amount of interest you’ll pay on the loan but usually requires making larger monthly payments.
- Switch loan types. If you have an ARM and anticipate that interest rates will increase, refinancing to a fixed-rate mortgage helps you lock in a lower interest rate.
- Borrow money. With a cash-out refinance, you can take advantage of the equity you’ve built in your home. You’ll take out a new mortgage for a larger amount than you owe on your existing loan and receive the difference in cash. This cash can be used on goals like making home improvements, consolidating high-interest debts and paying for educational expenses.
How Refinancing Works
When you refinance, you pay off your existing mortgage with funds from a new loan based on your home’s current value. You can refinance with the same lender or a different one, depending on where you can get the best terms. Much like when you took out your initial mortgage, your finances will be scrutinized before you’re approved for your refinance, and you’ll need to pay closing costs. Once you’ve closed, you’ll begin making payments according to your new mortgage terms.
How Amortization Affects Mortgage Refinancing
Amortization is the process of paying off your mortgage in installments. You’ll chip away at your mortgage principal and pay interest every month, but exactly how much you’re paying toward principal and interest varies with each payment. Typically, more of your payment goes toward interest at first, and then you begin making larger principal payments over time.
When you refinance, you reset your loan term and the amortization schedule. That means you’ll go back to mainly paying interest with each mortgage payment.
Refinancing Considerations For Short-Term Owners
For your refinance to be worthwhile, you’ll need to own the home long enough for your savings to offset the upfront costs. Refinancing might not make sense if you’re planning to sell your home in the next few years.
The Cost Of Mortgage Refinancing
Refinancing a mortgage can save you money in the long run, but there are some costs to consider:
- Closing costs. These are lender fees and other costs associated with getting a new mortgage. Expect refinance closing costs to total 2% to 6% of the loan amount.
- Higher monthly payments. If you refinance to a shorter loan term, your monthly payment will likely increase.
- Higher interest costs. If you refinance to a longer repayment period or a higher interest rate, you’ll likely pay more interest over the life of the loan.
Determining Your Break-Even Point
The breakeven for a mortgage refinance is the point at which the savings from lowering your monthly payment exceed the upfront cost of refinancing. To calculate the number of months until you reach your break-even point, divide your refinance closing costs by the amount you anticipate saving each month.
Let’s use an example:
- Say you’re refinancing a $200,000 mortgage.
- Your closing costs come in at 3% of the loan amount, or $6,000.
- You can potentially save $200 a month by refinancing.
In this case, it would take 30 months, or 2 ½ years, to reach your break-even point.
How To Refinance Your Mortgage
The refinancing process will be similar to the process of getting your original mortgage. You’ll need to gather your financial information, review your credit history and shop for a lender. Once you select a lender and submit your application, you’ll go through underwriting, where the lender will review your finances. You may also need to have your home appraised to determine its current value.
On the plus side, the closing process will be less complicated, since the agreement is only between you and the lender.
FAQ
Have more questions about refinancing? We have answers.
More Calculators
Use our toolbox of calculators to take the guesswork out of your home budget. We factor in all the variables so you don’t have to.
