Mortgage Refinance Calculator: Is Refinancing Worth It?

Refinancing is typically worth it when you can secure a lower interest rate that will save you money over the life of the loan, even after accounting for closing costs. A common rule of thumb is that refinancing makes sense if you can reduce your interest rate by at least 0.5% to 1%. However, this depends on your specific situation, including how long you plan to stay in your home and your current loan balance.

The amount you can save depends on several factors: your current interest rate, the new rate you qualify for, your loan balance, and how long you plan to stay in your home. For example, refinancing a $200,000 mortgage from 4.5% to 3.5% could save you over $100 per month and tens of thousands in interest over the life of the loan. Our refinance calculator can help you estimate your potential savings.

Refinancing costs typically range from 2% to 5% of your loan amount and may include: application fees, appraisal fees, title insurance, attorney fees, origination fees, and recording fees. For a $200,000 mortgage, expect to pay between $4,000 and $10,000 in closing costs. Some lenders offer "no-cost" refinancing, but this usually means they're either rolling the costs into your loan or offering a higher interest rate.

The refinancing process typically takes 30 to 45 days from application to closing, though it can vary based on your lender, the complexity of your financial situation, and current market conditions. This timeline includes time for your application review, home appraisal, underwriting, and final approval. Having all your documentation ready upfront can help speed up the process.

The break-even point is the time it takes for your monthly savings to equal the total cost of refinancing. For example, if refinancing costs $3,000 and saves you $150 per month, your break-even point is 20 months. If you plan to stay in your home longer than the break-even period, refinancing could be beneficial. Our calculator shows you this break-even point based on your specific numbers.

If you plan to move before reaching your break-even point, refinancing may not be worth it. The closing costs might outweigh the savings you'll realize in the short term. However, if you can achieve significant monthly savings and have very low closing costs, it might still make sense. Consider factors like job stability, family plans, and local market conditions when making this decision.

Yes, you can refinance with less than 20% equity, but you'll likely need to pay Private Mortgage Insurance (PMI) on the new loan. Some loan programs, like FHA streamline refinancing or VA Interest Rate Reduction Refinance Loans (IRRRL), have more flexible equity requirements. The key is ensuring that the benefits of refinancing outweigh the additional cost of PMI.

Most lenders require a credit score of at least 620 for conventional refinancing, though you'll get better rates with scores of 740 or higher. For FHA refinancing, you may qualify with a score as low as 580. Your credit score affects not only your eligibility but also the interest rate you'll receive. If your score has improved since you got your original mortgage, you might qualify for better rates.

Switching to a 15-year mortgage can save you significantly on total interest costs and help you build equity faster. However, your monthly payments will be higher. This strategy works best if you can comfortably afford the higher payments and plan to stay in your home for many years. Consider your other financial goals, like retirement savings and emergency funds, before committing to higher payments.

Yes, you can often roll closing costs into your new mortgage balance, but this means you'll pay interest on these costs over the life of the loan. This approach can be helpful if you don't have cash available for closing costs, but it reduces your overall savings from refinancing. Alternatively, some lenders offer "no-cost" refinancing where they cover closing costs in exchange for a slightly higher interest rate.