Mortgage Refinance Calculator

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Frequently Asked Questions

What is mortgage refinancing?

Mortgage refinancing is the process of replacing your existing mortgage with a new loan, typically to get a lower interest rate, change the loan term, switch loan types, or access home equity. Refinancing involves closing costs (2-5% of loan amount) and requires qualification based on income, credit, and equity.

How do I know if refinancing is worth it?

Refinancing is worth it if you can lower your rate enough to recoup closing costs within your planned time in the home. A general rule: refinance if you can lower your rate by at least 1% (0.5% for larger loans). Calculate the breakeven point by dividing closing costs by monthly savings.

What is the breakeven point in refinancing?

The breakeven point is when your monthly savings from refinancing equal the closing costs. For example, if closing costs are $5,000 and you save $200/month, the breakeven is 25 months. If you plan to stay longer than 25 months, refinancing makes financial sense.

How much can I save by refinancing?

Savings depend on the rate difference and loan size. Refinancing from 7% to 5.5% on a $250,000 loan saves about $250/month. Over 30 years, that is $90,000+ in interest savings. However, extending the term back to 30 years may increase total interest paid even with a lower rate.

What are the costs of refinancing?

Refinance closing costs typically range from 2-5% of the loan amount, including: origination fee (0.5-1%), appraisal ($400-$700), title search ($500-$1,000), recording fees ($100-$300), credit report ($30-$50), and prepaids for new escrow account. Some costs may be waived if using the same lender.

What is a no-closing-cost refinance?

A no-closing-cost refinance means the lender pays your closing costs in exchange for a higher interest rate. The rate is typically 0.25-0.5% higher than a standard refinance. This is useful if you plan to move soon or lack upfront cash, but total interest paid over time is higher.

How does refinancing affect my credit score?

A refinance application causes a hard inquiry (drops score 5-10 points temporarily) and lowers the average age of accounts. However, consistent on-time payments on the new loan rebuild credit. The impact is usually minor and short-lived, lasting 6-12 months.

What is a rate-and-term refinance?

A rate-and-term refinance changes the interest rate and/or loan term without taking cash out. For example, going from a 30-year at 7% to a 15-year at 5.5%. This is the most common type of refinance and typically has the lowest rates and easiest qualification.

What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a larger loan, giving you the difference in cash. You can borrow up to 80% of your homes value. The cash can be used for home improvements, debt consolidation, or other purposes. Rates are slightly higher than rate-term refis.

How much equity do I need to refinance?

Most lenders require at least 5-20% equity (80-95% LTV) for a rate-term refinance. Cash-out refinances typically require 20% equity (80% LTV). FHA streamline and VA IRRRL refinances may have no equity requirement but require the loan to be current.

What is the difference between fixed-rate and adjustable-rate refinance?

Fixed-rate refinance locks in a rate for the entire term. Adjustable-rate (ARM) starts lower but can change after an initial period. ARMs may make sense if you plan to move before the rate adjusts. Fixed-rate provides certainty and is the most popular choice.

Can I refinance with bad credit?

Refinancing with bad credit is possible but you may face higher rates or stricter requirements. FHA streamline refinances have minimal credit requirements. FHA 203(k) and VA IRRRL loans may be options. Improving your credit score before applying can save thousands.

What is an FHA streamline refinance?

An FHA streamline refinance allows borrowers with existing FHA loans to refinance with limited documentation. No appraisal or credit check is typically required. The rate must be lower and there must be a net tangible benefit. Upfront MIP (1.75%) is still required.

What is a VA IRRRL (Interest Rate Reduction Refinance Loan)?

The VA IRRRL, or VA streamline refinance, allows veterans with existing VA loans to refinance with minimal paperwork. No appraisal, credit underwriting, or income verification is needed. The rate must be lower. A funding fee (0.5%) applies unless waived for disabled veterans.

What is the HARP program?

HARP (Home Affordable Refinance Program) helped underwater homeowners refinance. It expired in 2018. The replacement is Fannie Maes HIRO (High Loan-to-Value Refinance Option) and Freddie Macs similar program. These help borrowers with limited equity refinance at current rates.

How long does a refinance take?

A typical refinance takes 30-45 days from application to closing. Streamline refinances (FHA, VA) can close in 2-3 weeks. Cash-out refinances and investment property refis take longer. Delays can occur due to appraisal issues, documentation problems, or high lender volume.

Should I refinance to a 15-year mortgage?

A 15-year mortgage has higher monthly payments but significantly lower total interest. Refinancing from a 30-year at 6.5% to a 15-year at 5.5% might increase your payment by $500/month but save $200,000+ in interest over the loan life. Best if you can afford the higher payment.

What is the break-even rule for refinancing?

The break-even rule: divide total closing costs by monthly savings. If you save $200/month and costs are $4,000, breakeven = 20 months. If you plan to stay less than 20 months, refinancing likely isnt worth it. Most experts recommend refinancing if breakeven is under 2-3 years.

Can I refinance multiple times?

Yes, you can refinance as often as you want, but each time involves closing costs and credit inquiries. Most lenders require 6-12 months between refinances. Frequent refinancing can reset the loan term, potentially increasing total interest. Only refinance when the savings justify the costs.

How does refinancing affect my taxes?

Mortgage interest on refinanced loans is still tax-deductible up to $750,000 of debt. Points paid on refinancing must be amortized over the loan term (not deducted in year paid). Cash-out refinance interest is deductible if used for home improvements. Consult a tax professional.

What documents are needed to refinance?

Typical documents: pay stubs (30 days), W-2s and tax returns (2 years), bank statements (2-3 months), retirement account statements, ID, homeowners insurance declarations, and the current mortgage statement. Self-employed borrowers need additional business documentation.

What is the current refinance rate?

Refinance rates fluctuate daily based on market conditions, the Fed, inflation, and economic data. Rates vary by loan type (conventional, FHA, VA), credit score, LTV, and loan amount. Check current rates from multiple lenders and use our calculator to estimate potential savings.

How does refinancing affect private mortgage insurance?

If your home has appreciated, refinancing can eliminate PMI if the new LTV is below 80%. A new appraisal can reflect higher value. Conversely, if you cash out and increase LTV above 80%, you will need PMI on the new loan. Rate-term refis generally maintain or improve LTV.

What is a debt consolidation refinance?

A cash-out refinance can be used to pay off high-interest debts (credit cards, personal loans). The mortgage rate (6-8%) is typically lower than credit card rates (20%+). However, this stretches consumer debt over 30 years and converts unsecured debt to secured (risking foreclosure).

What is the difference between pre-approval and pre-qualification for refinance?

Pre-qualification is an informal estimate of what you might qualify for. Pre-approval involves a full application and credit check, giving a firm commitment. For refinancing, most borrowers go straight to application since they already have a mortgage relationship with the lender.

How does refinancing work on an investment property?

Investment property refinancing requires higher credit scores (680+), lower LTV (75-80% max), and higher rates than owner-occupied refinances. Rental income may be used to qualify. Cash-out on investment properties is limited to 75% LTV. Documentation requirements are more stringent.

Can I refinance if I am unemployed?

Refinancing while unemployed is difficult because lenders need documented income for qualification. Exceptions: FHA streamline (no income verification) if you have an existing FHA loan, or VA IRRRL if you have a VA loan. Otherwise, you need a co-borrower with income or wait until re-employed.

What is the 6-month seasoning rule for refinancing?

Most lenders require you to have owned the home for at least 6 months before refinancing (seasoning). This applies to purchase money mortgages. Cash-out refinances may require 6-12 months of ownership. FHA and VA loans have their own seasoning requirements.

How do I choose a refinance lender?

Compare rates, fees, and closing costs from 3-5 lenders. Check online reviews and the Better Business Bureau. Consider your current lender (may waive some fees). Look at the Loan Estimate and compare APR, origination fees, and total closing costs. Customer service and communication matter.

Can I refinance with an FHA loan to conventional?

Yes, refinancing from FHA to conventional removes the upfront and annual MIP. This makes sense when you have enough equity (20%+) to avoid PMI and qualify for conventional rates. The conventional loan may have a slightly lower rate and no mortgage insurance.

What is an appraisal waiver for refinancing?

Some lenders offer appraisal waivers for refinances if sufficient data supports the home value, saving you $400-$700. Fannie Mae and Freddie Mac automated systems may waive appraisals for low-LTV, high-credit borrowers. FHA and VA loans typically require appraisals for refinances.

Does refinancing pay off my old loan?

Yes, when you refinance, the new lender pays off your existing mortgage with the proceeds from the new loan. Any remaining proceeds (in a cash-out refi) go to you. The old loan is closed, and you begin making payments on the new loan with the new terms.