Mortgage Refinance Calculator

Refinancing is the process of replacing your existing mortgage with a new loan that has different terms, conditions, and often a different interest rate. When you refinance, you're essentially paying off your current mortgage and starting fresh with a new one, potentially with a different lender.

Homeowners typically refinance to achieve several goals:

• Lower monthly payments: By securing a lower interest rate or extending the loan term
• Reduce total interest paid: Through shorter loan terms or better rates
• Switch loan types: Converting from adjustable-rate to fixed-rate mortgages
• Access home equity: Through cash-out refinancing for home improvements or debt consolidation
• Remove PMI: Once you've built 20% equity in your home

Closing costs are fees and expenses you pay when finalizing a mortgage refinance, similar to what you paid when purchasing your home. These costs typically range from 2% to 6% of your loan amount.

Common closing costs include:

• Loan origination fees: Charges from your lender for processing the new loan (typically 0.5% to 1% of loan amount)
• Appraisal fees: Cost to determine your home's current market value ($300-$700)
• Title search and insurance: Ensures clear property ownership and protects against title defects
• Credit report fees: Cost to pull your credit history
• Escrow and recording fees: Administrative costs for processing and recording documents
• Attorney fees: Legal review of documents (in some states)
• Prepaid items: Property taxes, homeowners insurance, and interest that accrue before your first payment

Understanding these costs is crucial for calculating your break-even point and determining if refinancing makes financial sense for your situation.

No-cost refinancing (also called no-closing-cost refinancing) allows you to refinance without paying closing costs upfront. However, the costs don't disappear—they're handled in one of two ways:

Option 1: Higher Interest Rate
Your lender offers a slightly higher interest rate (typically 0.25% to 0.5% higher) in exchange for covering your closing costs. The lender receives additional interest over time, which compensates them for paying your fees upfront.

Option 2: Rolling Costs Into Loan
The closing costs are added to your loan balance, increasing your principal. You'll pay interest on these costs over the life of the loan, but you won't need cash upfront.

When does no-cost refinancing make sense?

• You don't have cash available for closing costs
• You plan to sell or refinance again within a few years
• You need to preserve cash for other purposes
• Current rates are significantly lower than your existing rate

Important considerations: While convenient, no-cost refinancing means you'll pay more over the long term through either higher monthly payments (higher rate) or increased total debt (rolled-in costs). Calculate the total cost difference to ensure it aligns with your financial goals and timeline.

Consider refinancing when:

• Interest rates have dropped: Even a 0.5% to 1% reduction can result in significant savings
• Your credit score improved: Better credit can qualify you for lower rates
• Home value increased: More equity means better loan terms and possibly eliminating PMI
• Financial situation changed: You want to adjust your monthly payment or loan term
• Need to access equity: For home improvements, debt consolidation, or major expenses
• Want payment stability: Switching from adjustable-rate to fixed-rate mortgage

The break-even point is the time it takes for your monthly savings to equal the closing costs you paid for refinancing. It's calculated by dividing your total closing costs by your monthly payment savings.

Example: If refinancing costs $5,000 and saves you $200/month, your break-even point is 25 months (just over 2 years). If you plan to stay in your home longer than this period, refinancing makes financial sense.

Use our calculator above to determine your specific break-even point and ensure refinancing aligns with your plans.

The refinancing process typically takes 30 to 45 days from application to closing. This timeline includes:

• Application submission and initial review (1-3 days)
• Home appraisal (1-2 weeks)
• Underwriting and loan approval (2-3 weeks)
• Closing preparation and final review (3-5 days)
• Three-day rescission period (required for refinances on primary residences)

Timeline can vary based on lender efficiency, document submission speed, and loan complexity.

Refinancing typically causes a small, temporary dip in your credit score (usually 5-10 points) due to:

• Hard credit inquiry from lender (inquiry remains for 2 years but impact fades after 6 months)
• Closing your old loan account (reduces average account age)
• Opening a new credit account

However, your score typically recovers within a few months, especially if you make on-time payments. The long-term benefits of lower payments and reduced debt usually outweigh this temporary impact.

Yes, refinancing with less-than-perfect credit is possible, though options may be limited. Consider:

• FHA refinancing: Available with credit scores as low as 580 (or 500 with 10% down payment)
• VA streamline refinance (IRRRL): For eligible veterans with minimal credit requirements
• USDA refinancing: For rural properties with flexible credit standards
• Conventional loans: Typically require 620+ credit score

Lower credit scores generally mean higher interest rates. Work on improving your credit score before refinancing to access better rates and save more money.

Typical refinancing documentation includes:

• Recent pay stubs (last 2 months)
• W-2 forms or tax returns (last 2 years)
• Bank statements (last 2-3 months)
• Current mortgage statement
• Homeowners insurance information
• Photo identification (driver's license or passport)
• Proof of additional income (if applicable)
• Investment account statements (if using assets for qualification)

Self-employed borrowers may need additional documentation such as profit and loss statements and business tax returns.