Refinance Calculator
Should you refinance? See the exact savings.
When Refinancing Makes Sense
Refinancing replaces your current mortgage with a new one at different terms — usually a lower rate, a shorter term, or both. It costs $3,000-8,000 in closing costs, which means the monthly savings must be large enough to recoup that upfront expense within a reasonable timeframe. The breakeven point — the month when cumulative savings exceed closing costs — is the key number in any refinance decision.
The old rule of thumb was "refinance if the new rate is at least 1% lower." This is oversimplified but directionally correct. A 1% rate reduction on a $300,000 mortgage saves roughly $200/month. With $5,000 in closing costs, the breakeven is 25 months. If you plan to stay in the home longer than 25 months, refinancing saves money. If you might move sooner, the closing costs are not recovered.
The 15-Year vs 30-Year Decision
Many homeowners refinance from a 30-year mortgage into a 15-year at a lower rate. This increases the monthly payment but dramatically reduces total interest. A $280,000 balance at 7% with 27 years remaining has a monthly payment of $1,893 and total remaining interest of $333,000. Refinanced to 15 years at 5.75%, the payment rises to $2,326 (+$433/month) but total interest drops to $138,000 — saving $195,000 in interest and paying off the home 12 years sooner.
The tradeoff is cash flow flexibility. The higher monthly payment on a 15-year mortgage cannot be reduced during a financial setback (job loss, medical expense) without refinancing again. A financially safer approach: take the 30-year refinance (lower required payment) but make extra payments equivalent to the 15-year amount when you can afford to. You get the flexibility of a lower minimum with the option to accelerate when cash flow allows.
What closing costs should I expect?
Typical refinance closing costs are 2-3% of the loan amount: $4,000-8,000 on a $250,000 mortgage. Major components: appraisal ($400-600), title search and insurance ($1,000-2,000), origination fee (0.5-1% of loan), credit report ($30-50), and recording fees ($100-200). Some lenders offer "no-closing-cost" refinances that roll the costs into a slightly higher rate — convenient but more expensive over the life of the loan.
Can I refinance with bad credit?
FHA streamline refinances allow existing FHA borrowers to refinance without a credit check or appraisal. For conventional loans, most lenders require a credit score of 620+ (680+ for the best rates). If your credit has improved since your original mortgage, refinancing can be especially valuable because the rate improvement reflects both market conditions and your personal credit improvement.