Refinancing your mortgage replaces your existing loan with a new one—usually to lower your interest rate, reduce monthly payments, or change loan terms. Our calculator computes your monthly savings, break-even point, and total interest cost over the life of the new loan so you can decide if refinancing makes financial sense.
A common rule of thumb is to refinance if you can lower your rate by at least 0.75%–1% and you plan to stay in the home long enough to recoup closing costs. Our break-even calculator shows exactly how many months it takes to recover upfront costs.
Refinance closing costs typically run 2%–5% of the loan amount and include origination fees, appraisal, title insurance, and prepaid escrow items. On a $300,000 loan, expect $6,000–$15,000 in closing costs.
Lenders roll closing costs into the loan balance or offer a slightly higher interest rate in exchange for zero upfront costs. This reduces the break-even risk but increases your loan balance or monthly payment—best for those who may move within a few years.
Applying for a refinance triggers a hard inquiry, temporarily lowering your score by a few points. Multiple mortgage inquiries within a 45-day window are typically treated as a single inquiry by credit scoring models, so rate shopping does not significantly damage your score.
A cash-out refinance lets you borrow more than your current mortgage balance and receive the difference in cash—using your home equity. This can fund home improvements, education, or debt consolidation, but increases your loan balance and monthly payments.
If your home value has dropped below your loan balance, you are underwater and standard refinancing is difficult. The HARP program (now expired) helped these borrowers; today, options include Fannie Mae's High LTV Refinance Option (HIRO) for qualifying loans.