Mortgage Refinance Calculator

Consider refinancing when: (1) Interest rates drop 0.5-1% or more below your current rate, (2) Your credit score has improved significantly (could qualify for better rate), (3) You want to switch from ARM to fixed-rate, (4) You need to remove PMI (if home value increased), (5) You want to shorten loan term (e.g., 30yr to 15yr), (6) You need cash-out for home improvements or debt consolidation. General rule: Must stay in home at least 2-3 years to break even on closing costs.

Closing costs typically 2-6% of loan amount, average $5,000-$7,000. Includes: Application fee ($300-500), Origination fee (0.5-1% of loan), Appraisal ($400-600), Title search/insurance ($700-1,000), Credit report ($25-50), Recording fees ($100-250), Attorney fees ($500-1,500 in some states). Some lenders offer "no-closing-cost" refinances by charging higher interest rate instead - you pay over time rather than upfront.

Break-even point is when your monthly savings equals closing costs paid. Formula: Closing Costs / Monthly Savings = Break-Even Months. Example: $6,000 closing costs / $200/month savings = 30 months (2.5 years). If you sell before break-even, you LOSE money on the refinance. If you stay past break-even, you save money. Critical factor if planning to move soon. Staying 5+ years makes refinancing attractive with even small rate reductions.

Refinancing from 30-year to 15-year loan: PROS - Pay off mortgage faster, build equity quicker, save significantly on total interest (often 50%+ savings), usually get lower interest rate. CONS - Higher monthly payment (often 30-50% more), less financial flexibility, opportunity cost (could invest difference). Good if: approaching retirement, income is stable/growing, want to own home outright sooner, minimal other debt. Not ideal if: tight budget, prefer liquidity, have higher-interest debt to pay off first.

Cash-out refinance: Borrow more than you owe and take difference in cash. Example: Owe $200k, home worth $400k, refinance for $250k, get $50k cash. Uses: Home improvements (often best ROI), debt consolidation (if high-interest credit cards), investment property down payment, emergency fund. Requirements: Typically need 20% equity remaining (80% LTV max), higher rates than regular refinance. Caution: Increases debt, extends payoff timeline, home is collateral. Alternative: HELOC (home equity line of credit) for more flexibility.

Yes, but more challenging. Minimum credit scores: Conventional: 620+, FHA: 580+, VA: No minimum but lenders usually want 600+. Lower credit = higher interest rates. Strategies to improve chances: (1) Pay down debt to lower DTI ratio, (2) Save for larger down payment (lowers LTV), (3) Wait 6-12 months to improve credit score, (4) Consider FHA Streamline Refinance (no credit check if current FHA loan), (5) Add co-borrower with better credit. Even small credit improvements can save thousands in interest.

Rate-and-Term Refinance: Change interest rate and/or loan term only. Loan amount stays same or slightly higher (to cover closing costs). Lower rates, easier qualification, can pay off faster. Cash-Out Refinance: Increase loan amount to take cash. Typically 0.25-0.5% higher interest rate, stricter qualification (max 80% LTV usually), treated as riskier by lenders. Use rate-and-term if just want better terms. Use cash-out only if you need funds for specific purpose and it is cheaper than alternatives (personal loan, HELOC, credit cards).

Usually yes, but exceptions exist: Standard refinance: Appraisal required ($400-600) to verify home value and calculate LTV. Exceptions: (1) FHA Streamline Refinance - no appraisal if current FHA loan, (2) VA Interest Rate Reduction Refinance Loan (IRRRL) - no appraisal, (3) Some conventional loans offer appraisal waiver if: excellent credit, low LTV, property recently appraised, automated valuation model (AVM) available. Appraisal protects lender and ensures you are not over-leveraging. If home value dropped, may not qualify or need PMI.

Typical timeline: 30-45 days from application to closing. Breakdown: Days 1-7: Application, submit documents (tax returns, pay stubs, bank statements), initial underwriting. Days 7-14: Home appraisal ordered and completed. Days 14-30: Final underwriting, title search, insurance verification, clear any conditions. Days 30-45: Final approval, schedule closing, sign documents, fund loan. Can be faster (2-3 weeks) if: excellent credit, simple situation, responsive to document requests, lender pre-approval. Can be slower if: self-employed, credit issues, property complications, incomplete documentation.

Standard documents: (1) Last 2 years tax returns with all schedules, (2) Last 2 months pay stubs, (3) Last 2 months bank statements (all accounts), (4) W-2s for last 2 years, (5) Current mortgage statement, (6) Homeowners insurance policy, (7) Photo ID, (8) Proof of HOA payments (if applicable). Additional if self-employed: Business tax returns (2 years), Profit/Loss statements, CPA letter. Additional if rental property: Lease agreements, rental income documentation. Tip: Organize documents before applying to speed up process. Do not make large deposits or purchases during underwriting - triggers questions.