Compare your current mortgage with new loan terms to see if refinancing will save you money. Calculate break-even point, total savings, and compare multiple scenarios.
Time for monthly savings to cover closing costs
| Metric | Current Loan | New Loan | Difference |
|---|
| Year | Current Balance | New Balance | Difference |
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Consider refinancing when interest rates drop significantly (typically 1% or more below your current rate), your credit score has improved, or you want to change your loan term. The break-even point helps determine if closing costs justify the savings.
The break-even point is when your accumulated monthly savings equal your closing costs. If you plan to stay in your home past this point, refinancing typically makes financial sense. A shorter break-even period means a better refinance decision.
A cash-out refinance lets you tap into your home equity by replacing your current mortgage with a larger one. You receive the difference in cash, which can be used for home improvements, debt consolidation, or other major expenses. Note that this increases your loan balance.
Rate-and-term refinancing changes your interest rate, loan term, or both without borrowing additional money. This is ideal for lowering monthly payments or paying off your mortgage faster. Term reduction typically saves more interest even if the payment increases.
Typical closing costs range from 2-5% of the loan amount and include appraisal fees, title insurance, origination fees, and more. Some lenders offer "no-closing-cost" refinances, but these usually come with higher interest rates.
Discount points lower your interest rate (1 point ≈ 0.25% rate reduction) but increase closing costs. Lender credits reduce closing costs but increase your rate. Choose based on how long you plan to keep the loan.