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, shorten your loan term, or pull out equity for other financial needs. When you refinance, your new lender pays off your current mortgage and issues a new loan under updated terms.
Homeowners often refinance to save money over time, access cash, remove mortgage insurance, or switch from an adjustable-rate mortgage (ARM) to the stability of a fixed-rate loan. The right refinance can improve your monthly budget or long-term financial outlook, depending on your goals.
How to Use the Mortgage Refinance Calculator
Our refinance calculator helps you quickly estimate whether refinancing makes financial sense. Here’s how to use it:
1. Enter your current mortgage details
Fill in your home value, remaining loan balance, current interest rate, remaining term, and monthly housing expenses such as taxes, insurance, and HOA dues. If you have mortgage insurance, enter that as well.
2. Choose your new loan terms
Select the type of loan you’re considering (Conventional, FHA, VA) and input the new interest rate and new loan term. If you’re taking cash out or rolling closing costs into the new loan, include those amounts.
3. Review your estimated results
The calculator will generate a side-by-side comparison showing:
- Your current monthly payment
- Your new estimated monthly payment
- Closing costs
- Monthly savings
- Break-even timeline
- Total interest savings (or costs) over time
You’ll also see visual charts showing how your loan balance and interest change with the refinance.
How Much Does It Cost to Refinance a Mortgage?
Refinancing typically costs 2% to 6% of your loan amount, though actual costs vary by lender, loan type, and location. Common refinance expenses include:
- Lender origination fees
- Appraisal
- Title search and insurance
- Credit report
- Recording fees
- Taxes and government charges
- Discount points (optional)
Many lenders allow you to roll closing costs into the new loan, which reduces your upfront expense but increases your total loan amount. Our calculator helps you see the impact of doing this so you can make an informed choice.
What Are the Requirements to Refinance a Mortgage?
While requirements vary by loan type and lender, most homeowners need to meet the following criteria:
Sufficient home equity
Many lenders prefer at least 20% equity for a conventional refinance. FHA and VA loans may allow less.
Solid credit history
A higher credit score typically results in better interest rates. Conventional refinances often require 620+, while FHA and VA programs are more flexible.
Stable income and employment
Lenders look for proof of consistent earnings and a reasonable debt-to-income (DTI) ratio.
An acceptable appraisal
Your home may need to be appraised to confirm its value.
Current loan seasoning
Some loan types require you to wait a certain period before refinancing. For example, FHA loans generally require at least 210 days between the original mortgage and the refinance.
Reasons to Refinance a Mortgage
Homeowners refinance for many different reasons. Here are some of the most common:
Lower your interest rate
A reduced rate can significantly cut your monthly payment or save thousands in interest over time.
Reduce your monthly payment
Extending your loan term or getting a lower rate can ease financial pressure.
Shorten your loan term
Switching from a 30-year to a 15-year mortgage can help you build equity faster and save on total interest.
Switch to a fixed-rate loan
If you have an adjustable-rate mortgage (ARM), refinancing into a fixed rate can protect you from future rate increases.
Remove mortgage insurance
FHA loans often include mandatory mortgage insurance. Refinancing to a conventional loan may eliminate it.
Tap home equity (cash-out refinance)
Use your home’s equity to consolidate debt, fund home improvements, or cover large expenses.
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Mortgage Refinance FAQs
Is refinancing always worth it?
Not always. Refinancing makes sense when the long-term savings outweigh the closing costs. Our calculator helps you analyze your break-even point to determine whether the numbers work in your favor.
How long does it take to refinance a mortgage?
Most refinances take 30 to 45 days, depending on lender workload, appraisal timing, and documentation.
Can I refinance with bad credit?
Yes, but options may be limited. FHA and VA loans tend to offer more flexible credit guidelines, though your interest rate may be higher.
Can I refinance if my home value has dropped?
Possibly. Some loan programs allow refinancing with little or no equity, but options are more limited compared to traditional refinances.
How many times can I refinance?
There is no limit. You can refinance as often as it makes financial sense and you meet lender requirements.
Does refinancing hurt my credit?
Your credit may dip slightly due to the hard inquiry, but it typically rebounds. Over time, lower payments and improved debt management can benefit your score.