Refinance Calculator

A refinance pays off your current mortgage with a brand-new loan and moves you onto the new terms at closing. The process looks like the original purchase, with an application, underwriting, an appraisal, and a closing, minus the seller, the agents, and the move. Closing costs are correspondingly lower than on a purchase but still real money, typically 2 to 5 percent of the loan amount. One mechanical detail deserves attention before any rate shopping. The new loan restarts amortization from month one. Refinance 27 remaining years into a 30-year loan, as the defaults here do, and you sign up for three extra years of payments. A lower rate can still win on those terms, but the win is smaller than the payment drop suggests.

Every refinance trades an upfront cost for a monthly benefit, and the break-even month is where the benefit finally covers the cost. Divide closing costs by monthly savings: $6,000 in costs against $200 in savings puts break-even at 30 months. Sell or refinance again before that month and the deal lost you money, whatever the rate cut looked like on paper.

Rate quotes only mean something against the current market, and the cleanest reference is Freddie Mac's Primary Mortgage Market Survey, a weekly national average for 30-year and 15-year fixed loans. Your quote will differ from the survey figure because of credit score, points, loan size, and property type, but the gap should be modest and explainable. If every quote you receive sits far above the survey average, ask why before assuming that is your price. Comparing three or more lenders on the same day, with the same points, is the only way to see the spread; studies of mortgage shopping consistently find meaningful rate differences between lenders for identical borrowers.

A rate-and-term refinance changes the rate, the term, or both without touching the balance. It is the standard move when the goal is simply better terms on the same debt. A cash-out refinance raises the balance and hands you the difference. Owe $200,000 on a $450,000 home, refinance for $280,000, and roughly $80,000 arrives in cash while the debt grows by the same amount. Expect a rate 0.125 to 0.25 percent above a comparable rate-and-term deal, and a cap near 80 percent of the home's value. The money is cheap next to credit cards or personal loans, which is exactly why it deserves care: a cash-out converts unsecured debt into debt backed by your house. The CFPB's consumer answers cover the risks in more detail.

The defaults describe a common situation: $280,000 still owed at 7.5 percent with 27 years left, refinanced into a 30-year loan at 6.25 percent with $5,000 in closing costs. The old payment is $2,018 a month. The new one is $1,724. That $294 difference repays the closing costs in 18 months, which is a comfortable break-even for anyone planning to stay put. The lifetime picture is more modest than the monthly one. Interest remaining on the old loan totals about $374,000; the new loan runs about $341,000 over its full term. After subtracting closing costs, the refinance saves roughly $28,000, not the windfall the $294 monthly figure might suggest, because the payoff date moved three years further out. Choosing a shorter new term, or paying the new loan on the old schedule, captures considerably more.

The most common misread is fixating on the payment while ignoring the payoff date. Take a $250,000 balance at 7.25 percent with 22 years left: refinancing into a 30-year loan at 6.75 percent cuts the payment by about $275 a month yet adds roughly $83,000 in lifetime interest, because eight extra years of payments swamp the half-point improvement. A short holding period sinks the case just as surely. If break-even sits at 30 months and a job move is plausible within two years, the closing costs become a sunk expense. Small balances fail for a different reason: the monthly savings shrink with the loan size while closing costs hold roughly steady, so a half-point cut on $120,000 takes past eight years to recover. In each of these situations, keeping the current loan and simply prepaying principal often beats the refinance.