What Is Mortgage Refinancing?
Mortgage refinancing is the process of replacing your existing home loan with a new one — usually to secure a lower interest rate, reduce your monthly payment, change your loan term, or tap home equity for financial goals. When you refinance, your new loan pays off your current mortgage balance and resets your amortization schedule.
Homeowners refinance for many reasons: lowering interest costs, switching from an adjustable-rate mortgage (ARM) to a fixed-rate loan, consolidating debt, eliminating mortgage insurance, shortening their payoff timeline, or accessing equity through a cash-out refinance.
The right refinance strategy depends on your financial situation, home equity, and long-term goals.
How to Use the Mortgage Refinance Calculator
This calculator helps you quickly determine whether refinancing saves money — and by how much. Here’s how to use it:
1. Enter your current mortgage details
Input your existing loan information, including:
- Current loan balance
- Current interest rate
- Remaining loan term
- Monthly housing expenses such as taxes, insurance, HOA dues (optional)
- Extra monthly payments (if any)
This allows the calculator to recreate your current amortization curve.
2. Choose your new loan terms
Select the details of your new loan:
- New interest rate
- New loan term (15-year, 20-year, 30-year, etc.)
- Whether you want to include closing costs in the new loan balance
- Cash-out amount (if applicable)
3. Review your estimated results
The calculator will display:
- Your new monthly payment
- Your old monthly payment
- Interest savings (or cost) over the life of the loan
- Total closing costs
- Break-even point
- Monthly payment difference (higher or lower)
- Total cost difference (old vs. new loan)
You’ll also see charts comparing loan balances, interest paid, and cash flow.
How Much Does It Cost to Refinance a Mortgage?
Refinancing typically costs 2%-6% of your loan amount, depending on lender, state, and loan type. Common refinance expenses include:
- Lender origination fees
- Appraisal fee
- Title search & title insurance
- Credit report fee
- Recording fees
- Taxes and government charges
- Discount points (optional)
Many homeowners choose to roll closing costs into the new loan, which reduces upfront expenses but increases total interest paid. This calculator shows both cash-to-close and financed closing cost scenarios.
What Are the Requirements to Refinance a Mortgage?
While requirements vary by loan type and lender, most homeowners need:
1. Sufficient home equity
Conventional loans require about 20% equity for a standard refinance. FHA and VA loans may allow less.
2. Solid credit history
A higher credit score typically leads to better interest rates.
- Conventional refinance: usually 620+
- FHA refinance: more flexible
- VA refinance: flexible, depending on lender
3. Stable income and employment
Lenders look for consistent earnings and a reasonable debt-to-income ratio (DTI).
4. An acceptable appraisal
Your home’s value must support the new loan amount.
5. Current loan seasoning
Some loan types require a minimum number of payments before refinancing. For example, FHA loans generally require 210 days before refinancing.
Reasons to Refinance a Mortgage
Homeowners refinance for many financial benefits. Below are the most common reasons.
Lower your interest rate
A lower rate can significantly reduce your monthly payment and total interest over the life of your loan.
Reduce your monthly payment
Refinancing to a longer-term loan (e.g., 30 years) lowers monthly payments and improves cash flow.
Shorten your loan term
Switching to a 15-year mortgage can help you build equity faster and save tens of thousands in interest.
Remove mortgage insurance (PMI or MIP)
Conventional refinance can eliminate private mortgage insurance. FHA loans that reach sufficient equity may also refinance into a non-FHA loan to drop mortgage insurance.
Tap home equity (cash-out refinance)
A cash-out refinance lets you convert part of your home equity into cash for renovations, investments, debt consolidation, or other expenses.
Mortgage Refinance FAQs
Is refinancing always worth it?
Not always. Refinancing only makes sense when long-term savings exceed the closing costs. This calculator helps evaluate the break-even point and overall benefit.
How long does it take to refinance a mortgage?
Most refinances take 20-45 days, depending on appraisal speed, lender workload, and documentation.
Can I refinance if my credit score has dropped?
Yes – options may still be available. FHA and VA loans are more flexible with credit requirements.
Can refinancing hurt my credit?
A refinance may cause a small temporary score drop due to credit inquiries and account changes, but it often rebounds quickly.
How many times can I refinance?
There is no legal limit. You can refinance multiple times as long as it financially benefits you and meets lender guidelines.
Does refinancing reset my mortgage payoff timeline?
Yes – unless you refinance into a shorter-term loan or continue making extra payments.