Refinance Calculator

This refinance calculator compares the loan you have now against the one you are considering. Enter your current balance, payment, and rate, then the new term, rate, points, and closing costs. It returns the new monthly payment, the APR once fees are counted, your upfront cost, the month you break even, and whether the switch saves or costs money over the full term. Points and fees are folded into the APR, which is why the APR usually lands above the quoted rate.

What loan refinancing is

Refinancing is taking out a new loan to pay off an existing one, normally to get a lower rate, a different term, or cash from your equity. The old balance is cleared on the day the new loan funds, and you make payments on the new loan from then on. Any collateral behind the old loan, such as a house or a car, carries over to the new one. Refinancing is most common with mortgages, auto loans, and student loans, though credit card balances and personal loans can be moved the same way. Replacing debt because you cannot keep up with payments is a different process called debt restructuring, where a lender agrees to change the terms of a delinquent account rather than issue a fresh loan.

Why people refinance

Five motives cover almost every refinance:

• A lower rate. If you borrowed when rates were high, or your credit score has climbed since, a new loan at a lower rate cuts the interest you pay for the rest of the term. Dropping a $250,000 balance from 7% to 6% saves roughly $2,500 in interest in the first year alone.
• Cash from equity. Once you have paid the balance down, you can refinance for more than you owe and take the difference in cash. This is a cash-out refinance, and it is mostly a mortgage move.
• A smaller payment. Stretching the remaining balance over a longer term lowers what you owe each month. The trade is more interest overall, since you are borrowing the same money for longer.
• A shorter loan. Going from a 30-year mortgage to a 15-year one usually comes with a lower rate and a much smaller interest bill, at the cost of a higher monthly payment.
• Rate certainty. Moving from a variable rate to a fixed rate locks your payment for the rest of the term. The reverse also happens when a borrower expects rates to fall and wants a lower starting rate.

Consolidating several loans into one is a sixth reason, and it overlaps with the others: one due date, one rate, one payment. Our Debt Consolidation Calculator works through that case, and the Debt Payoff Calculator compares payoff orders if you would rather keep the loans separate.

Refinancing a mortgage

A mortgage refinance replaces your home loan with a new one, and there are four common forms. Each has a different reason behind it.

Rate and term. You refinance the remaining balance into a new loan with a better rate, a different length, or both, and take no cash out. This is the standard move when market rates drop below what you are paying.

Cash-out. You borrow more than you owe and pocket the difference. Most lenders want you to keep at least 20% equity afterward, so on a $400,000 home with $250,000 owed, the new loan would typically cap around $320,000, leaving about $70,000 in cash before fees. Borrowers use it for home improvements, a medical bill, or paying off credit cards at a far higher rate. The opposite is a cash-in refinance, where you bring money to closing to shrink the balance, often to reach 20% equity and drop mortgage insurance. To enter a cash-out in the calculator above, put the amount in the cash out field; for a cash-in, enter it as a negative number.

FHA to conventional. FHA loans charge an annual mortgage insurance premium that, for most loans made since 2013, lasts the entire term regardless of how much equity you build. Conventional loans drop private mortgage insurance once you reach 20% to 22% equity. Refinancing out of an FHA loan at that point removes the premium and can lower the payment even at a similar rate. There is also an FHA Streamline Refinance for staying inside the FHA program, which normally skips a new appraisal but requires that your current FHA loan be paid on time and in good standing. The FHA Loan Calculator covers the premium math in detail.

ARM to fixed. An adjustable-rate mortgage starts cheap and then resets on a schedule tied to an index. Refinancing into a fixed rate before the first reset ends that uncertainty. Borrowers also refinance to drop a co-borrower, such as an ex-spouse, from the loan.

What a mortgage refinance costs

Closing costs on a refinance usually run 2% to 5% of the loan amount, so a $250,000 refinance costs roughly $5,000 to $12,500. The line items below make up most of that total, and they belong in the costs and fees field above.

• Application fee, charged by some lenders to process the file whether or not it is approved.
• Origination fee or discount points, commonly 0% to 2% of the loan. One point equals 1% of the loan and buys down the rate, which is why points sit in their own field in this calculator.
• Appraisal, typically $300 to $700, to confirm the home is worth enough to support the loan.
• Title search and title insurance, a few hundred dollars or more, to confirm no liens or claims sit against the property.
• Document preparation and recording fees, usually a few hundred dollars combined, paid for producing and filing the paperwork with the county.
• Inspection, survey, and flood certification, required in some areas or by some lenders, at a few hundred dollars each.

Lenders sometimes offer a no-closing-cost refinance. The fees do not disappear; they are either added to the balance or paid for with a slightly higher rate. Enter it that way to see the real cost. For the payment side of a new mortgage, use the Mortgage Calculator, and the APR Calculator for the fee-adjusted rate on any loan.

Finding your break-even point

Your break-even point is the upfront cost divided by the monthly interest you save. Pay $5,000 in points and fees to save $208 a month in interest and you break even at month 25. Stay in the home past that and the refinance is money ahead; sell or refinance again before it and you paid $5,000 for nothing. This is the single number that decides most rate-and-term refinances, which is why it sits in the result panel above.

One thing the break-even month does not capture: resetting a 30-year mortgage you have already paid on for eight years back to a fresh 30-year term can raise total interest even at a lower rate, because you have added eight years of payments. The lifetime figure in the results accounts for that, so check both. Matching the new term to the time left on the old loan, as the default 20-year entry does, avoids the problem. The Mortgage Payoff Calculator shows what extra payments do instead, which sometimes beats refinancing outright.

Refinancing student loans

Refinancing a federal student loan converts it into a private loan, and the federal protections do not come with it. You give up income-driven repayment, deferment and forbearance rights, and eligibility for programs such as Public Service Loan Forgiveness. For a borrower with steady high income and a strong credit file, the lower rate can still win. For anyone whose income swings, or who might qualify for forgiveness, it rarely does.

Private student loans, Grad PLUS loans, and Parent PLUS loans are the usual candidates, since they carry the highest rates and no forgiveness path. Lenders generally want a credit score in the high 600s or better before offering a rate worth taking. Note that federal consolidation is a separate thing: the Department of Education combines your federal loans into one at a weighted average rate, keeping federal status, while refinancing replaces them with a private loan. Run the numbers first in the Student Loan Calculator.

Refinancing a car loan

Car loans are refinanced for a lower rate or a longer term, and the second one is where people get hurt. A car loses value faster than a stretched loan pays down, so extending a 48-month loan to 72 months can leave you owing more than the car is worth. That is an upside-down loan, and it becomes a problem the moment you want to sell or the car is totaled.

Costs are small compared with a mortgage: an administrative or application fee, a lien transfer fee, and state re-registration, often under $200 in total. Check the old contract for a prepayment penalty before you sign anything new. The Auto Loan Calculator prices the replacement loan.

Refinancing credit card debt

Credit card debt is revolving, so it is refinanced differently: you move the balance instead of replacing a loan. A balance transfer card offers 0% for an introductory window, commonly 12 to 21 months, with a transfer fee of 3% to 5% of the amount moved. Transferring $8,000 at a 3% fee costs $240 upfront and saves far more than that against a 22% card rate, provided you clear the balance before the promotional rate ends and the regular APR takes over.

The other route is a fixed-rate debt consolidation loan, which suits balances too large for one card limit and gives you a firm payoff date instead of a deadline. Either way, the saving only holds if you stop adding new charges to the cleared cards. The Credit Card Payoff Calculator shows how long the balance takes to clear at a given payment.

Refinancing a personal loan

Refinancing a personal loan pays off the old one with a new one, usually to capture a lower rate after your credit improves or your income rises. The test is the same as any refinance: interest saved has to beat the origination fee on the new loan, which often runs 1% to 8% of the amount borrowed. There is no legal cap on how many times you can do it, though lenders set their own rules, and some will not lend again until you have made a number of on-time payments or paid the original balance down. Approval turns on your credit history and your debt-to-income ratio; the Personal Loan Calculator and the Debt-to-Income Ratio Calculator cover both sides.

How this calculator works

The calculator solves for the remaining term of your current loan, then prices the new loan and compares the two. If you enter a balance and a monthly payment, it derives how many months are left at your current rate. If you enter the original amount instead, it rebuilds the payment and the balance from the loan term and the time remaining. The new payment uses the standard amortization formula on the balance plus any cash out, and the APR is solved from the payment stream after points and fees are subtracted from the proceeds, which is why it exceeds the nominal rate whenever costs are involved. Lifetime savings compares total payments on both loans and then subtracts the upfront cost, so the figure you see is money in hand, not a rate comparison. Escrow items such as property tax and insurance are left out, since they do not change when you refinance.