Home Loan Refinance Calculator:
Should I Refinance? When Will I Break Even?

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Alerts you to lenders' loose use of the term "refinance savings" and helps you to forecast the unbiased net-consequences of refinancing your home loan.

This free online Home Loan Refinance Calculator will calculate the net effect of refinancing your home loan at a lower interest rate, a different term, or both.

The calculator includes a cash out option and a built-in feature to help you estimate the refinance mortgage closing costs (no closing costs, low, medium, and high settings).

Plus, unlike most other online mortgage refinancing calculators, the home loan refinance calculator on this page will calculate how long you will need to stay in your refinanced mortgage in order for the lower interest rate savings to offset the cost of the new home loan (break-even point).

Finally, the calculator will even calculate the effect refinancing will have on your Loan-To-Value (LTV) ratio, and then estimate the expected change to your PMI (Private Mortgage Insurance) payment.

What Does "Refinance" mean?

In case you're not familiar with the term, Refinance (Refi for short) basically means to replace an existing loan with a new loan. The new loan pays off the existing loan, leaving with you with one or more new terms (principal, interest rate, payment amount, and/or number of payments).

Sounds simple enough, right?

Well, it would be if it wasn't for the fees.

Mortgage Refinancing Fees

Like most of their other high-profit products, lenders have done everything they can to complicate what would otherwise be a very simple decision. Lenders know consumers are only interested in who offers the lowest rates, so they lower their rates and make up the difference by charging a highly imaginative list of different loan fees (refer to the full refinance calculator on this page for a list and estimates).

Making matters worse, no two lenders have the same fee schedule. Not only does this make cost-estimation and rate comparisons anything but simple, but it also prevents me from being able to give you the exact cost of the fees. Instead, all I can offer is an estimation.

Average Closing Costs

Based on my research, the average refinancing closing costs charged by lenders can run between 3% and 6% of the refinanced loan balance.

To help you to put that in perspective, enter the current balance owed on your existing mortgage into the mini calculator below:

Average Mortgage Closing Costs Calculator
Enter your mortgage balance:
Estimate closing costs (3%-6%): $0 - $0
If added to loan balance (30 years at 6%): $0 - $0

As you can see from the results, you will need to refinance at a rate low enough to more than offset the cost of the fees in order to realize any actual savings. And when I say "savings", I'm talking about real savings, not reduced payment savings.

When Are Refinance "Savings" Truly Savings?

If you have used mortgage refinance calculators on other web sites, you may have noticed that some only return the difference between your existing house payment and the refinanced house payment. And if the refinanced house payment is lower, you will often see the calculated difference, followed by the statement, "Monthly Payment Savings."

There's only one problem. Unless the total cost of refinancing (interest plus closing costs) is less than the cost of not refinancing, the term "savings" cannot and should not be used in the results.

If you refinance at a lower rate, but extend the payoff period out longer than the existing loan term, there's a good chance that refinancing will actually end up costing you more money, as opposed to "saving" you money.

So please, just because the refinanced house payment is lower than your current payment, DO NOT ASSUME YOU WILL BE SAVING MONEY BY REFINANCING.

And if you happen upon a refinance calculator that does not calculate and compare the long-term costs of refinancing, I suggest you do your calculating elsewhere.

Why Refinance a Mortgage?

While their are many reasons to consider, here are some of the most common reasons for refinancing a mortgage:

  • To get a lower rate: If interest rates have dropped, or your credit score has improved (qualifying you for a lower rate).
  • To get a shorter term: If you'd like to pay your mortgage off ahead of schedule without incurring prepayment penalties.
  • To cash out some of your equity: If you'd like to borrow money at mortgage interest rates instead of at consumer loan rates (not recommended).
  • To get a lower payment: If a lower interest and/or a longer repayment term will make the payments more affordable.
  • To get out of an "underwater mortgage" (home value is less than balance owed): Qualified homeowners can apply for the Federal Housing Finance Agency's Home Affordable Refinance Program (HARP).

Of course, mortgage lenders will likely tell you the best reason for refinancing is so you can lower your payment amount, so you can have more money to spend on fun things and activities. However, as noted earlier, if you're not careful, a lower payment now can cause you to have less "fun money" in the future ... much less!

Should I Refinance My House?

In my opinion, you should only refinance if your existing mortgage is fairly recent (most interest is paid in the early portion of the repayment term), and if doing so will save you money in the long run.

But what if you can't afford the size of your current monthly mortgage payment? Then you probably bought more house than you could actually afford (check the House Affordability Calculator to see if that might have been the case.)

Most people I know would be far better off if, instead of refinancing, they sold their over-sized home and purchased a more practical size home -- financed at the lower rate.

And by practical size, I mean a less expensive home that has lower property tax, insurance, utility, and maintenance costs. But no one wants to hear that. It seems most would rather live in their dream homes even if it means struggling to pay the nightmare payment and expenses.

In any case, if you have the opportunity to refinance at terms that will reduce your overall cost of repaying the home loan (including closing costs), I would proceed, but with the utmost caution. Why? Because ...

Loan Officers Don't Get Bonuses for Saving You Money

If you have determined that refinancing your existing mortgage will save you money in the long run, make sure you request a detailed breakdown of all upfront costs, along with an amortization schedule showing principal and interest breakdown and totals. Also be sure to get a copy of the loan agreement, along with a magnifying glass to make sure you can scour every word of the fine print.

Be especially watchful for any verbiage related to "prepayment penalties," as some mortgage companies will offer you low, or no-cost refinancing, but often at the expense of higher interest rates and stiff prepayment penalties that will prevent you from getting a cheaper loan at a later date.

How To Refinance Your House

If you are serious about refinancing, here the the steps I recommend:

  1. Research your home's current market value: If your market value has increased, thereby lowering your Loan-To-Value ratio, refinancing may allow you to eliminate Private Mortgage Insurance (PMI).
  2. Find out your credit score: Lenders will want to know your credit score before they will quote you a rate. The lower your credit score, the lower the interest rate you will qualify for.
  3. Shop for the best rate: Start with your current lender as they may be able to offer you discounted closing costs (no appraisal, etc.). Always request a firm estimate of the loan fees from those lender's offering the best rates (do so sparingly, as a sudden jump in the number of credit checks might have adverse effects on your credit score). This is to insure lower rates or closing costs aren't being offset by higher fees.
  4. Gather all data about your current mortgage: Find out your current payoff, principal and interest payment, interest rate, PMI payment, and prepayment penalty (if any), then use the refinance mortgage comparison calculator on this page to see if refinancing will end up saving you money for as long as you plan to stay in your present home.
  5. Weigh refinancing against principal prepayment: Use the extra payment mortgage calculator to see if making extra principal payments can achieve the same or better savings than refinancing.
  6. Contact the chosen lender: If the calculations indicate refinancing will generate savings over and above the costs, contact the lender you decided on during step #3 and tell them you are ready to start the process.

With that, let's use the Home Loan Refinance Calculator to calculate and compare the costs of your existing mortgage versus the costs of a mortgage refinanced at a lower rate.

Calculate Home Mortgage Refinancing Comparison
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Instructions: If you'd like the calculator to calculate LTV and PMI, enter the current market value of your home, and your current monthly PMI payment amount.

If you've been making the prescribed monthly payments, choose "Original Terms" and enter the original home loan amount, the annual percentage rate (APR), the original home loan term in years, and the number of payments made.

Or, if you've made extra, unscheduled, or intermittent payments, choose "Current Payoff Amount" and enter the current payoff, the current APR, and your current monthly principal and interest payment amount.

Next enter the new refinance rate, new loan term, and any cash-out or cash-in amounts that may apply.

Next, either select None, Low, Medium, or High to have the calculator estimate your closing costs, or select None to enter your own closing cost estimates.

Finally, choose whether or not you want to include the closing costs in the amount to refinance, and then click the "Calculate Mortgage Refinance Comparison" button.

Mouse over the blue question marks for a further explanation of each entry field. More in-depth explanations can be found in the glossary of terms located beneath the Home Loan Refinance Calculator.

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Help Optional: Estimated market value of home ($):
Help Optional: Current monthly PMI payment ($):
Existing Mortgage Terms
Help Mortgage entries will be based on: Original Terms Current Payoff Amount
Help Original home loan amount ($):
Help Original annual interest rate (%):
Help Original home loan term in number of years (#):
Help Number of house payments already made (#):
Refinancing Terms
Help Refinance rate (%):
Help Refinance loan term in number of years (#):
Help Cash out ($):
Help Cash in ($):
Help Mortgage Refinance Closing Costs Estimate
Help Loan origination fee or points (%):
Help Mortgage application fee ($):
Help Appraisal fee ($):
Help Document fee ($):
Help Legal fee ($):
Help Inspection fee ($):
Help Survey fee ($):
Help Credit report fee ($):
Help Title search fee ($):
Help Title insurance fee ($):
Help Recording fee ($):
Help Other closing costs ($):
Help Finance closing costs?
Preliminary Results
Help Current monthly principal and interest payment:
Help Current mortgage payoff amount:
Help Loan origination fee:  
Help Total of other loan fees:  
Help Total closing costs on new mortgage:
Help New mortgage amount:
Help Months till refinance savings offsets closing costs:
Comparison Results Existing
Mortgage
Refinanced
Mortgage
Refinance
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Help Monthly PI Payment:
Help Net cost:
Help Loan to Value (LTV):
Help Monthly PMI payment:
Help Monthly PIP payment:
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Home Loan Refinance Calculator Glossary of Terms

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Home Value and PMI

Estimated market value of home: Optional. If you would like to include LTV (Loan to Value) and PMI (Private Mortgage Insurance) into the calculations, enter the estimated market value of your home. If you're not sure what the market value is, check the property listings in your area to see what similar homes are selling for. If you're not concerned with LTV and PMI, leave the field blank.

Current monthly PMI payment: Optional. If you entered a market value, and you are making a monthly PMI (private mortgage insurance payment), enter the monthly amount on this line. If you are not required to make a PMI payment, leave the field blank.

Existing Mortgage Terms

Mortgage entries will be based on: If you've been making regular scheduled payments, choose Original Terms. Otherwise, if you've been making extra or unscheduled payments, choose Current Payoff Amount. The first four rows will change when you switch between Original and Current terms.

Original Terms

Original home loan amount: Enter the dollar amount of the original home loan (principal borrowed).

Original annual interest rate: Enter the annual percentage rate (APR) of the original house loan.

Original home loan term in number of years: Enter the original repayment term of the house loan in number of years.

Number of house payments already made: Enter the number of monthly house payments you have already made on your existing home loan. If you have not made any payments at all, leave blank or enter a zero.

Current Payoff Amount

Current mortgage balance: Enter the principal balance owed on the mortgage (current payoff).

Current annual interest rate: Enter the current annual percentage rate (APR) of the house loan. Enter as a percentage (for .06, enter 6%).

Current monthly principal and interest payment: Enter the current monthly principal and interest payment amount. Be sure not to include the portion of the payment that may be designated for property taxes, homeowner insurance, and private mortgage insurance.

Refinancing Terms

Refinance rate: Enter the refinance rate (APR) of the new house loan.

Refinance loan term in number of years: Enter the refinance loan term of the new house loan in number of years.

Cash out: If you plan to borrow cash (not recommended) in addition to paying off the existing mortgage balance, enter the cash-out amount in the field on this line. Otherwise, leave the field blank.

Cash in: If you would like to add a lump sum of cash to pay down the principal (perhaps to save you from having to pay PMI), enter the cash-in amount in the field on this line. Otherwise, leave the field blank.

Mortgage Refinance Closing Costs

Estimate: To have the calculator estimate your closing costs for you, select either None (no closing costs, which is highly unlikely), Low, Medium, or High. Or select None if you would like to enter your own estimates.

Loan origination fee or points: Enter the points that will be assessed on the new mortgage. Enter as a percentage (for .015, enter 1.5%).

Mortgage application fee: Enter the estimated mortgage application fee ($250 - $300).

Appraisal fee: Enter the estimated appraisal report fee ($300 - $600).

Document fee: Enter the estimated document fee ($200 - $500).

Legal fee: Enter the estimated legal fee ($75 - $200).

Inspection fee: Enter the estimated inspection fee ($175 - $300)

Survey fee: Enter the estimated survey fee ($125 - $300).

Credit report fee: Enter the estimated credit report fee ($15 - $30).

Title search fee: Enter the estimated title search fee ($200 - $400).

Title insurance fee: Enter the estimated title insurance fee ($400 - $800).

Recording fee: Enter the estimated recording fee ($25 - $200).

Other closing costs: Enter the total of any other costs that will be assessed for the creation of the new mortgage, such as prepayment penalties, courier fees, etc..

Finance closing costs? If you would like to bundle all of the upfront financing points and fees into the new loan amount (not recommended), select Yes from the dropdown menu. Otherwise choose No. Choosing Yes will lower any refinance savings you would otherwise realize.

Preliminary Results

Current monthly principal and interest payment: Based on your entries, this is the amount of your current monthly principal and interest (PI) mortgage payment. This does not include property tax, homeowner insurance, or PMI payments.

Current mortgage payoff amount: Based on your entries, this is how much you still owe (principal balance) on your home loan after deducting all of the principal payments you have already made.

Loan origination fee: Based on your entries, this is total product of your refinanced loan balance times the loan origination percentage points.

Total of other loan fees: Based on your entries, this is total of all flat loan fees (not based on a percentage).

Total closing costs on new mortgage: Based on your entries, this is total of your points paid plus all other closing costs.

New mortgage amount: Based on your entries, this is the loan amount the calculator will use for the new mortgage amount. If you chose to include the closing costs in the loan amount, this result will be the combined total of your existing mortgage balance, plus the calculated closing costs. The amount also reflects any cash-out or cash-in amounts you entered.

Months till refinance savings offsets closing costs: Based on your entries, this is how many months you will need to stay in your refinanced mortgage before the refinance savings will offset the cost of obtaining the new mortgage (closing costs).

Comparison Results

Monthly PI Payment row: This row shows your current principal and interest payment, the refinanced principal and interest payment, and a column containing the difference between the two monthly payments. A plus sign (+) indicates a payment increase, whereas a minus sign (-) indicates a payment decrease.

Net cost row: This row shows the total of the remaining interest costs on your existing mortgage, the interest costs plus closing costs of the refinanced mortgage, and a column containing the difference between the two net-costs. A plus sign (+) indicates a cost increase, whereas a minus sign (-) indicates a cost decrease. Note that Net Costs does not account for changes in PMI.

Loan to Value (LTV) row: If you entered a market value, this row will show your current LTV ratio, the refinanced LTV ratio, and a column containing the difference between the two LTV ratios. A plus sign (+) indicates a LTV increase, whereas a minus sign (-) indicates a LTV decrease. LTV ratios greater than 80% will likely require that you purchase Private Mortgage Insurance (PMI).

Monthly PMI payment row: If you entered a market value, this row will show your estimated current monthly PMI (Private Mortgage Insurance) payment, the refinanced PMI payment, and a column containing the difference between the two PMI payment amounts. A plus sign (+) indicates a PMI increase, whereas a minus sign (-) indicates a PMI decrease.

Monthly PIP payment row: If you entered a market value, this row will show your estimated current monthly Principal, Interest, and PMI payment (PIP), the refinanced PIP payment, and a column containing the difference between the two PIP payment amounts. A plus sign (+) indicates a PIP increase, whereas a minus sign (-) indicates a PIP decrease.

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