Refinance calculator

Refinance mortgages: when they make sense and which type to consider

Refinancing replaces an existing mortgage with a new loan that pays off the old one. You might change the interest rate, repayment term, or loan structure, or borrow additional money against your home’s equity. The decision depends on your goal and the complete cost of the new loan—not just the advertised monthly payment.

When might refinancing help?

Homeowners may consider refinancing when a new offer could reduce borrowing costs, shorten the payoff timeline, or make payments more predictable. A lower quoted rate or an improved credit profile can create an opportunity, but neither automatically makes a refinance worthwhile. Compare the costs with how long you expect to keep the new loan.

Another goal may be reducing the monthly payment to create more room in your budget. Check whether that reduction comes from a better rate or simply from spreading the balance over more years. As the CFPB’s mortgage terminology guide explains, refinancing usually involves fees, and extending the term can change the long-term cost even when the payment falls.

Rate-and-term refinancing

A rate-and-term refinance focuses on changing the mortgage’s rate or repayment period rather than taking a substantial cash payout. A shorter term may increase the required payment while reducing total interest. A longer term may lower the payment while delaying payoff. Compare the proposed term with the years remaining on your current mortgage, not just its original length.

Refinancing from an adjustable-rate mortgage into a fixed-rate loan can provide more predictable principal-and-interest payments. Taxes, insurance, and other housing expenses can still change. This calculator compares fixed-rate assumptions; it does not forecast future adjustable rates. The Federal Reserve’s guide to mortgage refinancing discusses these different objectives.

Cash-out and cash-in refinancing

A cash-out refinance increases the mortgage balance to provide cash after the existing loan is paid off and applicable costs are accounted for. It may be used for a major expense or to replace other debt, but the cash is borrowed money rather than savings. Turning unsecured debt into mortgage debt also puts your home behind that obligation. The CFPB’s cash-out refinance research highlights the foreclosure risk associated with this debt substitution.

A cash-in refinance takes the opposite approach: you contribute money at closing to reduce the new balance. That may help you reach a desired loan-to-value ratio, subject to the lender’s terms. This calculator supports additional cash out, but does not separately model a cash-in contribution or determine how much equity a lender will let you borrow.

FHA and VA refinance options

Borrowers with an existing FHA-insured mortgage may be eligible for an FHA Streamline refinance. HUD describes this as a refinance with limited credit documentation and underwriting, subject to program requirements. “Streamline” does not mean automatic approval or no costs; review the premiums, fees, and required benefit with the lender.

For an existing VA-backed loan, an Interest Rate Reduction Refinance Loan (IRRRL) may help reduce payments or move to a more stable rate structure. It is different from a VA cash-out refinance. Eligibility and any funding fee must be checked for the specific transaction. This general refinance calculator does not automatically add FHA premiums or VA fees.

Compare closing costs and the break-even point

Ask for an itemized quote covering lender charges, points, title and settlement services, and any other required expenses. A “no-closing-cost” offer may shift the cost into a higher rate or, where permitted, a larger loan balance. Compare the upfront cash and the cost over time together.

For a simple refinance without cash out, divide upfront costs by the monthly principal-and-interest reduction. For example, $6,000 in costs divided by $155.19 in monthly savings gives about 38.7 months, rounded up to 39 months in this calculator. Selling or refinancing again before that point may leave the upfront costs unrecovered through those savings. This shortcut does not account for differences in remaining balances, timing, taxes, or the value of keeping cash available.

When keeping your current mortgage may make more sense

Refinancing can be less attractive when costs are high relative to the benefit, you expect to move soon, or the new loan would replace a lower rate with a higher one. Stretching a nearly repaid mortgage into a long new term may reduce the payment while increasing remaining interest. If your goal is faster payoff, compare refinancing with making additional principal payments using the mortgage calculator’s extra-payment options. Check your existing loan’s terms before choosing either approach.

Use this estimate to compare written loan offers

Enter the current remaining balance, rate, and term accurately, along with your actual principal-and-interest payment. Use a lender’s quoted rate and costs for the proposed loan. This tool assumes closing costs are paid upfront and compares principal and interest only; taxes, insurance, mortgage insurance, and eligibility are outside the model. Cash out is added to the new loan balance, and the simple break-even figure is omitted when it is included.

Review the Loan Estimate from each lender, including APR, fees, term, and cash required at closing. The CFPB’s Loan Estimate explainer can help you compare the details. Treat the result as a planning comparison, then confirm the final terms with the lender.