Realty Toolset

Mortgage Refinance Calculator

Calculate your potential savings and new monthly payments when refinancing.

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How Mortgage Refinancing Works

Mortgage refinancing replaces your existing home loan with a new one, typically to secure a lower interest rate, shorten or extend the loan term, or switch between fixed and adjustable rates.

When you refinance, the new lender pays off your original mortgage, and you begin making payments on the new loan under updated terms.

The process resembles your original mortgage application: you submit income documentation, undergo a credit check, and pay closing costs that usually range from 2% to 5% of the loan balance.

Homeowners often refinance to reduce monthly payments, tap into accumulated equity through a cash-out refinance, or eliminate private mortgage insurance once they've built sufficient equity in the property.

When to Consider Refinancing

Refinancing typically makes sense when current market rates sit at least 0.5% to 1% below your existing rate, since the savings usually outweigh closing costs within a reasonable timeframe.

Calculate your break-even point by dividing total closing costs by your monthly savings — if you plan to stay in the home longer than that, refinancing is generally worthwhile.

Other strong reasons include switching from an adjustable-rate to a fixed-rate mortgage for payment stability, shortening your loan term to build equity faster, or removing a co-borrower after a life change.

Improved credit scores since your original mortgage can also unlock better terms, even when broader market rates haven't moved dramatically.

Common Mistakes with Refinancing

One of the biggest mistakes is focusing only on the lower monthly payment without considering the reset loan term.

Refinancing a 30-year mortgage you've already paid down for eight years back into a fresh 30-year loan can mean paying significantly more interest overall, even at a lower rate.

Watch out for no-closing-cost refinances that simply roll fees into the loan balance or charge a higher rate to compensate.

Skipping the break-even calculation, ignoring prepayment penalties on your existing mortgage, and refinancing right before applying for other major credit are common traps.

Also avoid cash-out refinancing for discretionary spending, since you're converting unsecured-priced expenses into debt secured by your home.

Refinancing vs Home Equity Loan

Refinancing and home equity loans both let you tap into your home's value, but they work very differently.

A cash-out refinance replaces your entire mortgage with a larger new loan, leaving you with one monthly payment at current market rates.

A home equity loan, by contrast, sits on top of your existing mortgage as a second lien with its own separate payment, typically at a higher fixed rate.

Home equity loans usually have lower closing costs and faster approval, making them attractive when you only need a modest sum and already have a favorable first-mortgage rate.

Refinancing tends to win when rates have dropped meaningfully or you want to consolidate everything into a single payment.