We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.
With mortgage interest rates near historic lows, many homeowners are looking at potential benefits to refinancing. This mortgage refinance calculator can help you compare what a refinanced mortgage payment might look like with your current mortgage payment — as well as calculate how much you’ll save or lose by refinancing your home.
How to Calculate Your Refinance Savings
To use the mortgage refinance calculator, plug in your current monthly payment, interest rate, and the unpaid principal left on the mortgage. Then enter an expected new interest rate and loan term to calculate your new monthly payment. You’ll also need to enter an estimate of closing costs associated with the home refinance, such as credit report fees, appraisal fees, insurance and taxes, escrow and title fees, and lender fees. As a rule of them, closing costs can add up to 3 to 6% of your new mortgage amount.
Our calculator will show your estimated new monthly payment, the estimated all-in cost of refinancing, and how many months it’ll take to recoup those costs. Refinancing can be tedious and cost thousands of dollars, so you need to crunch the numbers to help decide whether it’s the right move for you.
What Is Refinancing?
Refinancing a mortgage is essentially replacing your current home loan with a new loan.
Refinancing is similar to any other loan in that you must apply, and the process involves a deep dive into your credit, income, employment history, and finances. Most people refinance when they have equity in their home — the difference between the worth of the home and the amount owed to the lender.
When you refinance, the original loan is paid off with money borrowed from the new loan. Refinancing a mortgage commonly lowers your interest rate and monthly payment, giving you more liquid cash month to month. You can also refinance into a shorter-term loan, which can help you save on interest and own your home outright sooner.
You have two basic options when refinancing: a rate-and-term refinance or a cash-out refinance. A rate-and-term refinance alters the interest rate or term — sometimes both — of an existing mortgage, and equity isn’t taken from the home. With a cash-out refinance, you’re getting a new loan that’s worth more than you owe and pulling out equity built up in the home. The difference is paid to you in cash.
When to Refinance
Knowing when to refinance is just as important as the decision to do it in the first place. The first step is figuring out how long you plan to stay in the home. Moving out of a home soon after you’ve refinanced doesn’t make financial sense, since you might not realize savings in time to cover the costs that went into the refinance in the first place. In most cases, it’s more logical to refinance if you know you’ll stay in your home for at least a few years. Having an idea of when you’ll break even with refinancing costs will help you plan your timing.
When You Should Not Refinance
You always want to make sure you’re refinancing for the right reasons. Refinancing can save you in the long run but it comes with some substantial up-front costs. So it’s important to make sure refinancing will substantially benefit your finances and that you’ll live in the home long enough to recover the costs. As a general rule of thumb, it’s not a good idea to refinance for short-term gains.