Mortgage Refinance Calculator

How to use a mortgage refinance calculator

To start, find your latest mortgage statement. This will give you the numbers you need to fill in the first six fields in the refinance calculator. 

The next section is a little trickier because it’s hard to know exactly how much closing costs will be until you’re well into the refinancing process. However, you can get a rough idea by checking out Bankrate’s guide to refinancing costs. 

Once you’ve plugged all the numbers into the mortgage refinance calculator, you can use the key outputs to determine whether a refinance makes sense. The most common measure is the break-even point. More about that below, but if your closing costs will be $4,800, for instance, and your monthly savings are $200, then you’ll break even in 24 months or two years. If you plan to be in the house well past two years, a refinance could be a good move.

How to interpret your results

Once you input the required data and calculate your result, you'll see your new estimated monthly payment, along with a few other data points. Here’s how to interpret your results:

• Monthly savings: This number shows how much you'd save on monthly payments by refinancing your mortgage.
• Difference in interest: This amount shows how much interest you would save by refinancing.
• Total cost: This figure represents the total cost to refinance your mortgage.
• Months to recoup costs: This tells you how long it will take to reach your break-even point and begin saving money from your refinance. 

Things to consider before refinancing

Refinancing doesn't always make sense. Here are the main questions to consider.

How long do you plan to stay in your home? 

Before refinancing, consider how long you plan to stay in your home. Most experts say you’ll want to be in your house at least two to five years after refinancing.

What is the break-even point? 

A key factor in whether to refinance a mortgage is when you’ll break even on your costs. You can calculate the break-even point by adding up all refinancing closing costs and figuring out how many years it will take you to make up those costs with the savings from your new mortgage payment compared to your previous one. Refinancing could make sense if you plan to stay in your home longer than the break-even point. Otherwise, you could lose money. 

How much does it cost to refinance a mortgage?

While refinancing can save you money in the long run, it comes with upfront fees. Refinancing usually includes the same fees you paid when you first bought your home, such as:

• Lender fees, including a mortgage application fee, loan origination charges and mortgage points
• Third-party fees, such as the appraisal fee, document recording and a credit check
• Title search/insurance fees
• Escrow costs for property taxes and homeowners insurance

Your closing costs vary depending on the new loan amount and your credit score, debt-to-income ratio, loan program and interest rate. According to Freddie Mac, the average closing costs on a refinance are around $5,000 — 3 percent to 6 percent of the loan principal — but the total can range widely depending on the home's value, the mortgage size and the property location.

Shopping around for a lender who not only offers a competitive interest rate but also the lowest fees is worth your time and effort. Because refinancing can cost thousands of dollars, make sure it also has a tangible financial benefit to you and that you’ll stay in your home long enough to recoup the fees.

What are the requirements to refinance a mortgage?

You need to qualify for a refinance much the way you did for your original mortgage. You'll typically need:

• Credit score: Most lenders like to see a minimum of 620, but higher is better.
• Debt-to-income ratio: Generally, lenders like to see 43 percent or less of your gross monthly income go toward debt payments, including your mortgage. A higher ratio may be permitted if you have a lot of savings or other compensating factors.
• Solid payment history: If you have recent missed or late mortgage payments, it may be difficult to qualify for a refinance.
• Loan-to-value ratio: Typically, lenders want you to own at least 20 percent of your home to refinance your mortgage.

You'll also need to prove that you have sufficient income to afford the new payments and provide similar financial documentation to that you supplied in your first application.

Refinance options

There are multiple ways to refinance your mortgage, including: 

• Rate-and-term refinance: The most common type of refinance, a rate-and-term refinance replaces your current loan with one for the same outstanding amount, only with a new interest rate, repayment term or both.
• Cash-out refinance: With a cash-out refinance, you borrow against the equity in your home, withdrawing a portion of the difference between what you still owe and its current value in cash. Ideally, you’ll also get a lower rate in the process.
• Cash-in refinance: The opposite of the cash-out. You’ll make a lump sum payment to reduce your loan balance. Then you’ll refinance this lower balance to get a new rate or repayment term — or both.
• Streamline refinance: This refinancing option is available for FHA loans (FHA streamline refinance), USDA and VA loans (VA IRRRL). Streamline refinances are typically faster, cheaper and easier to get than other refinances since they often don’t require a credit check or home appraisal.
• No-closing-cost refinance: Instead of paying closing costs upfront, a no-closing-cost refinance lets you either roll them into your new loan amount or pay a higher interest rate.
• Short refinance: This option might be worth considering if you’re hoping to refinance an underwater mortgage, one in which you owe more on your loan than it's worth. In a short refinance, your lender agrees to let you take out a smaller loan that’s in line with your property’s current value.