Mortgage Refinance Calculator - Calculate Refinancing Savings
Free refinance calculator to determine if refinancing saves money by comparing current vs new loan terms and calculating break-even analysis
Mortgage Refinance Calculator
Refinance Analysis
What is Mortgage Refinancing?
Mortgage refinancing is the process of replacing your existing home loan with a new one, typically to secure better terms. This financial strategy can lower your interest rate, reduce monthly payments, or change your loan duration.
Refinancing helps with:
- Lower monthly payments - Reduce housing costs with better rates
- Interest savings - Pay less interest over loan lifetime
- Cash-out equity - Access home equity for other purposes
- Debt consolidation - Combine debts into one payment
- Rate-and-term refinance - Change loan terms without cash-out
Refinance Cost Components
Refinancing involves several cost components that affect your break-even analysis:
Closing Costs
Fees for appraisal, title search, origination, and other lender charges.
Interest Savings
Monthly payment reduction multiplied by loan term equals total savings.
Break-even Point
Months needed to recoup closing costs through monthly savings.
Opportunity Cost
Time value of money and alternative investment opportunities.
Types of Mortgage Refinancing
Rate-and-Term Refinance
Change interest rate and/or loan term without changing loan amount. Most common type.
Cash-Out Refinance
Borrow more than current balance and receive difference in cash. Increases loan amount.
FHA Streamline Refinance
Simplified FHA refinance with reduced documentation and lower closing costs.
How to Use This Refinance Calculator
Enter Current Loan
Input current balance, rate, and years remaining (e.g., $250,000 at 5.0% for 25 years)
Enter New Terms
Input new interest rate, loan term, and estimated closing costs
Add Property Costs
Enter annual property tax and home insurance amounts
Review Analysis
Compare payments, calculate break-even point, and analyze savings
Benefits of Mortgage Refinancing
- •Lower Monthly Payments: Reduce housing costs and improve cash flow for other expenses.
- •Interest Savings: Pay less interest over the life of your loan with better rates.
- •Debt Consolidation: Combine high-interest debts into your mortgage at lower rates.
- •Flexible Terms: Change loan duration to match your financial goals and timeline.
- •Tax Advantages: Maintain mortgage interest deduction benefits with refinance.
When Should You Refinance?
Rate Drop of 0.75-1%
Significant rate reduction makes refinancing worthwhile after calculating break-even.
Plan to Stay 2+ Years
Break-even period should be shorter than your planned home ownership duration.
Credit Score Improved
Higher credit scores qualify for better rates and lower closing costs.
Cash Flow Needs Changed
Adjust payments to match current income and expense requirements.
Frequently Asked Questions
Common questions about mortgage refinancing and break-even analysis
What is mortgage refinancing?
Mortgage refinancing replaces your current loan with a new one, typically to get a lower interest rate, change loan terms, or access equity. It can lower monthly payments or total interest costs.
When should I refinance my mortgage?
Consider refinancing when interest rates drop 0.75-1% below your current rate, you can break even within 2 years, or you want to change loan terms. Always calculate the break-even point first.
What are closing costs for refinancing?
Closing costs typically range from 2-5% of your loan amount and include appraisal fees, title insurance, origination fees, and other lender charges. These costs must be recouped through savings.
How do I calculate refinance break-even point?
Divide total closing costs by monthly savings to find break-even months. If you plan to stay in your home longer than this period, refinancing typically saves money.
Should I refinance to a shorter loan term?
Refinancing to a shorter term increases monthly payments but reduces total interest. Consider this if you can afford higher payments and want to pay off your mortgage faster.
What credit score do I need to refinance?
Most lenders require 620+ credit score for conventional refinancing. FHA Streamline refinance may accept lower scores. Higher scores qualify for better rates and terms.
How much equity do I need to refinance?
You typically need at least 20% equity for conventional refinancing. FHA loans allow as little as 3.5% equity. Cash-out refinancing requires sufficient equity to borrow against.
Are there tax implications for refinancing?
Refinancing may affect property tax deductions and could trigger mortgage interest deduction recapture if you sell within 3 years. Consult a tax professional for your specific situation.