Should I Refinance My Mortgage?
Refinancing your mortgage can save you thousands of dollars, but it's not always the right move. Our refinance calculator
helps you determine if refinancing makes financial sense by calculating your monthly savings, break-even point, and total interest savings.
When Should You Refinance?
Consider refinancing when:
- Interest rates drop: If rates are 0.5-1% lower than your current rate
- Your credit improved: Better credit score = better interest rates
- You want to shorten the term: Refinance to a 15-year loan to pay off faster
- You need cash flow: Extend the term to lower monthly payments
- You plan to stay long-term: Need enough time to recover closing costs
Understanding the Break-Even Point
The break-even point is how long it takes for your monthly savings to equal your closing costs. This is crucial to understand:
- Example: If closing costs are $5,000 and you save $200/month, your break-even point is 25 months (about 2 years)
- Rule of thumb: Only refinance if you plan to stay in the home longer than the break-even point
- If you move before break-even: You won't recover your closing costs
Our refinance calculator automatically calculates your break-even point so you can make an informed decision.
What Our Refinance Calculator Shows
- New Monthly Payment: Your payment with the new loan terms
- Monthly Savings: How much you'll save each month
- Break-Even Point: How long to recover closing costs
- Total Lifetime Interest Savings: Total interest saved over the life of the loan
Refinancing Guide: What You Need to Know
Types of Refinancing
Rate-and-Term Refinance: Changes your interest rate and/or loan term without taking cash out. This is the most common type of refinance.
Cash-Out Refinance: Refinance for more than you owe and take the difference in cash. This increases your loan amount and monthly payment.
Cash-In Refinance: Pay down your loan balance at closing to get a better rate or remove PMI.
Refinancing Costs
Refinancing closing costs typically include:
- Appraisal: $300-$600 to determine home value
- Title Insurance: $500-$1,500
- Origination Fees: 0.5%-1% of loan amount
- Credit Report: $25-$50
- Recording Fees: $50-$500
- Other Fees: Underwriting, processing, etc.
Total: Typically 2-5% of your loan amount. For a $300,000 loan, expect $6,000-$15,000 in closing costs.
No-Closing-Cost Refinance
Some lenders offer "no-closing-cost" refinances, but this usually means:
- Closing costs are rolled into your loan amount (increasing your balance)
- Or you get a slightly higher interest rate
- You may pay more over time, but it can make sense if you plan to move soon
When NOT to Refinance
Refinancing may not make sense if:
- You plan to move before the break-even point
- You're close to paying off your loan (last 5-10 years)
- The rate difference is minimal (< 0.5%)
- Your credit score has dropped significantly
- You can't afford the closing costs
Tips for a Successful Refinance
- Shop around: Compare rates and fees from multiple lenders
- Improve your credit: Higher credit scores = better rates
- Calculate break-even: Use our calculator to ensure it makes sense
- Consider your timeline: How long do you plan to stay in the home?
- Read the fine print: Understand all fees and terms before signing