Mortgage Refinance Calculator

Refinancing makes sense when several conditions align:

Rate-based decision:

• You can lower your rate by at least 0.5-0.75%
• On a $300K loan, each 0.25% saves ~$50/month
• 1% rate drop saves ~$200/month or $72,000 over 30 years

Timeline-based decision:

• Calculate your break-even: Closing costs ÷ Monthly savings = Months to recoup
• Example: $6,000 costs ÷ $200/month savings = 30 months
• Plan to stay at least 1.5-2x the break-even period
• If moving in 2 years, almost never worth it

Other good reasons to refinance:

• Switch from adjustable-rate to fixed-rate for stability
• Remove PMI (if you now have 20%+ equity)
• Shorten term to build equity faster (30→15 years)
• Cash-out for home improvements that add value
• Remove an ex-spouse from the mortgage after divorce

Expect 2-5% of the loan amount in closing costs:

On a $300,000 refinance:

• Appraisal: $400-700
• Title search and insurance: $1,000-2,500
• Origination fee: $1,500-3,000 (0.5-1% of loan)
• Recording fees: $100-300
• Credit report: $30-50
• Prepaid interest: $500-1,500 (depends on closing date)
• Total: $4,000-$10,000

Ways to reduce refinance costs:

• No-closing-cost refinance: Lender covers costs in exchange for 0.125-0.25% higher rate
• Roll costs into loan: Increases balance but preserves cash
• Shop multiple lenders: Fees vary by $2,000-4,000
• Negotiate: Origination fees are always negotiable
• FHA Streamline or VA IRRRL: Reduced costs for qualifying borrowers

No-cost refi math:

• $300K loan, rate drops from 7.25% to 6.50% (with costs) vs 6.625% (no cost)
• With costs: Save $150/month but pay $6,000 upfront. Break-even: 40 months
• No cost: Save $115/month immediately. Better if staying under 4 years

The numbers tell a compelling story:

$300K balance, current rate 7.25%:

Refinance to 30-year at 6.25%:

• Payment: $1,847/month
• Total interest: $364,920
• Payoff: 30 years from now

Refinance to 15-year at 5.75%:

• Payment: $2,494/month
• Total interest: $148,920
• Payoff: 15 years from now

Difference:

• Monthly: $647 more per month
• Interest saved: $216,000 over the life of the loan
• Own home free and clear 15 years sooner

Choose 30-year if:

• Cash flow is tight — you need the lower required payment
• You have higher-interest debt to pay off first
• You'll invest the difference at returns higher than 6.25%
• Want flexibility to pay extra when you can

Choose 15-year if:

• You can comfortably afford the higher payment (under 25% of income)
• You're 40+ and want to be mortgage-free before retirement
• You have no high-interest debt and a solid emergency fund
• The guaranteed 5.75% return on extra principal appeals to you

A cash-out refi replaces your mortgage with a larger one and gives you the difference:

Example:

• Home value: $500,000
• Current mortgage: $300,000
• Cash-out refi: $380,000
• Cash received: $80,000 (minus closing costs)
• Must keep at least 20% equity ($100K)

Good uses for cash-out:

• Home renovations that increase property value
• Consolidating high-interest debt (credit cards at 20%+ → mortgage at 6-7%)
• Funding a business or investment with expected returns above mortgage rate
• Emergency expenses (medical, major repairs)

Bad uses for cash-out:

• Vacations, cars, or luxury purchases
• Investments you don't understand
• Paying off debt you'll just run up again

Cash-out vs HELOC:

• Cash-out: Fixed rate, one lump sum, replaces entire mortgage. Better for large, one-time needs
• HELOC: Variable rate, draw as needed, keeps first mortgage. Better for flexible, ongoing access to equity

Yes, but it costs more:

Conventional refinance:

• Minimum 3% equity (97% LTV) for primary residence
• 5% equity is more commonly required
• Below 20% equity: PMI required (0.3-1.5% of loan/year)
• PMI adds $75-375/month on a $300K loan

FHA Streamline refinance:

• Must already have an FHA loan
• No appraisal required (equity doesn't matter)
• Must show "net tangible benefit" (lower payment)
• MIP still required

VA IRRRL (Interest Rate Reduction Refinance Loan):

• Must already have a VA loan
• No appraisal, no income verification
• Must lower rate or switch from ARM to fixed
• Minimal closing costs

When low equity refinancing makes sense:

• Rate drop is large enough that savings exceed PMI cost
• You're switching from ARM to fixed before rates adjust up
• Your current PMI is higher than what a new loan would charge
• You qualify for FHA Streamline or VA IRRRL

Typically 30-45 days from application to closing:

Timeline breakdown:

• Day 1-3: Application and document submission
• Day 3: Receive Loan Estimate
• Day 5-15: Appraisal ordered and completed
• Day 10-25: Underwriting review
• Day 25-35: Conditions cleared, final approval
• Day 30-45: Closing
• Day 33-48: 3-day right of rescission (you can cancel)

Documents you'll need:

• Last 2 pay stubs
• Last 2 years of W-2s or tax returns
• Last 2 months of bank statements
• Current mortgage statement
• Homeowners insurance policy
• Government-issued ID

Ways to speed up the process:

• Have all documents ready before applying
• Respond quickly to lender requests
• Choose a lender with a track record of fast closings
• Keep your finances stable (don't change jobs, open new credit, or make large purchases)