Mortgage Refinance Calculator

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What the mortgage refinance calculator results mean

Refinancing your mortgage replaces your current home loan with a new mortgage that cuts your monthly payment, pays your loan off faster or gets rid of mortgage insurance. The LendingTree Mortgage Refinance Calculator will help you decide if and when you should refinance your mortgage.

• Monthly cost analysis. Clicking on this tab will show you your monthly payment savings if you’re lowering your rate. It will show how much your payment will go up if you’re switching from a 30-year year to a 15-year fixed-rate mortgage.
• Lifetime cost analysis. This tab shows you how much you’ll save on total interest charges over the life of your loan.
• Break-even point. The calculator divides your closing costs by the monthly savings to determine your break-even point, which is the number of years it will take to recoup the refinance closing costs. The graphic will tell you if the refinance makes sense based on how long you plan to remain in your home.

What the bottom boxes tell you

• Monthly payment. This box tells you how much your total monthly payment will change.
• Interest rate. You’ll see how much your rate is changing here.
• Payoff time. Keep an eye on this box, especially if you’re refinancing from a 30-year loan to a new 30-year loan to see if the extra years added to your mortgage are worth the savings.
• Total loan cost. If you’re in your forever home, this calculation shows how much in total interest you could save by refinancing over the term of your new loan versus your existing loan.

How do you find your best mortgage rates?

The answer is simple: shop around. LendingTree studies show that consumers who shop for a mortgage save thousands of dollars in interest charges.

Mortgage interest rate forecasts change frequently, which means rates may change their pricing strategies daily. Shopping gives you the best chance of catching a special deal or moving on from a lender that’s not competitive.

Some big news about rates in 2023: The Federal Housing Finance Agency (FHFA) announced pricing adjustment changes for a number of factors. Most of the changes go into effect on May 1, and they could have an impact on the conventional mortgage refinance rate you’re offered. Look for the sign below for more information about the changes and how they might affect the mortgage rate you’re quoted.

Here are a few steps that may help you get the best rate:

Spruce up your credit scores. The higher your credit score, the better your rate will be. Shoot for 780 or higher to get the best rates. The previous “best” conventional loan credit score benchmark of 740 has been replaced by this new higher standard under the upcoming pricing changes.
Check your home’s equity. Your rate is based on how much equity you have, so give your real estate agent a call to give you an idea of how much your home might be worth.
Reduce your total monthly debt load. Lenders calculate your debt-to-income (DTI) ratio by dividing your total monthly debt, including your mortgage payment by your before-tax income, and generally prefer a DTI ratio of 43% of less. Some bad news: Upcoming conventional loan adjustment changes may include an extra charge if your DTI ratio exceeds 40%. The silver lining: The DTI ratio change has been delayed until August 1, so you have some time to clear out credit card balances or reduce other debt if you don’t plan to buy until then.
Watch for new cash-out refinance charges. If you’re tapping equity with a conventional refinance after May 1, 2023, you may face higher interest rates or an extra fee at closing. The fee will apply to homeowners borrowing 30% to 80% of their home’s value and will range from 0.375% to 5.125% of the loan amount for a cash-out refinance.

What is a mortgage refinance?

A refinance is a process that involves paying off your current mortgage and replacing it with a new home loan. The most common reason to refinance your mortgage is to lower your interest to reduce your monthly payment.

How does a mortgage refinance work?

Unless you’re eligible for a streamline refinance program like the FHA streamline or VA interest rate reduction refinance loan (IRRRL) the following steps best describe how to refinance a mortgage:

Pick your financial goal and loan program. This is important because any changes (like switching from a rate-and-term refinance to a cash-out refinance) could add extra hoops — and costs — to your refinance loan. The same is true for loan programs — choose a government-backed refinance loan if you need to refinance with bad credit, or a conventional loan if you have a high credit score and more than 20% equity in your home.
Shop for a lender and lock your rate. Once you’ve reviewed loan estimates and chosen the best lender for your needs, ask your lender for a mortgage rate lock. Mortgage rates change daily and your rate isn’t guaranteed until it’s locked in.
Gather your paperwork and get your home appraised. In most cases, you’ll need to provide current paysubs, W-2s and bank statements. You’ll also need information about the loan you’re paying off. Finally, spruce up your home for the home appraisal, unless you’re eligible for an appraisal waiver.
Finalize your closing disclosure and enjoy your savings. Once your loan is approved, you’ll receive a closing disclosure three business days before you sign. Review it and make sure the numbers are correct. If they are, sign your papers and you’re all done.

When should you refinance your mortgage?

There are a number of financial goals you can achieve by refinancing your mortgage. Below are some reasons to refinance your mortgage.

• Lower your rate. A lower rate means a lower monthly payment. If you can save money and recoup your costs in a reasonable timeframe, refinancing is usually a good bet.

Refi savings tip: If you use your payment savings to pay more toward your loan balance, you’ll build equity and pay your loan off faster.

• Reduce your loan term. A 15-year term means you have a mortgage-free house in half the time it takes with a 30-year mortgage.
• Switch from an adjustable-rate to a fixed-rate home loan. Nervous about an upcoming adjustable-rate mortgage rate change? Refinance to a fixed-rate so you sleep better at night.
• Cash-out home equity. Convert home equity into cash with a cash-out refinance and use the funds to pay off debt, make home improvements or pay for college tuition.
• Get rid of PMI. If home prices in your area are on the rise, you may have enough equity to refinance and get rid of your private mortgage insurance (PMI).
• Switch from an FHA loan to conventional one. If you bought your home with a Federal Housing Administration (FHA) mortgage with a 3.5% down payment, the only way to get rid of the FHA mortgage insurance is to refinance to a conventional loan.
• Take an ex-spouse off your mortgage. You may need to refinance after a divorce to remove a spouse from a home loan.

What do you need to refinance your mortgage?

If you aren’t eligible for the FHA streamline or VA IRRRL program, here’s what you’ll typically need to complete a refinance.

Your most current mortgage statement
Paystubs and W-2 or tax returns to prove your income
Bank or asset statements if you don’t plan to roll into your loan amount
A copy of your homeowners insurance
A home appraisal (your lender will order)
A new title insurance policy (your lender will order)

Frequently asked questions

You may be tempted to just ignore the “Length of Ownership” field in your calculations and leave it pre-set to five years. However, before you spend thousands of dollars on closing costs, get your home appraisal and provide all the documentation you typically need to refinance, make sure you’ve given some thought to how much longer you’ll be in the home.

Is it time to get a bigger home to support your growing family? Maybe it’s time to downsize your home now that the kids have flown the coop. Or it could be time to ditch city living for a home in the country. Pondering these questions before you refinance could save you time and money on something that won’t benefit you financially.

Conventional refinance loans. Fannie Mae and Freddie Mac set the guidelines for the most popular loan type: conventional loans. You can avoid mortgage insurance with 20% equity in your home.

FHA refinance loans. Homeowners with scores as low as 500 may qualify to refinance with an FHA loan. However, you’ll pay FHA mortgage insurance regardless of your equity amount.

VA refinance loans. Eligible military borrowers may be able to borrow up to 100% of their home’s value with a VA rate-and-term refinance. VA borrowers can borrow 90% of their home’s worth with a VA cash-out refinance.

USDA refinance loans. Borrowers in rural areas with current USDA loans can lower their payment, but don’t have a cash-out option.

If the break-even point doesn’t quite make sense for a refinance, consider one of these alternatives.

• Recast your loan. If you’re about to receive large lump sum of cash from a bonus or the sale of another property, your current lender may allow you recast your mortgage. Your new loan amount — and monthly payment — are based on how much cash you pay toward the balance. You can skip all the closing costs and paperwork, although the lender may charge a small fee to complete the process.

• Biweekly payment. If the payment shock on a 15-year mortgage is too much for your budget, try paying your mortgage every two weeks. Most lenders offer the option to set up biweekly payments, which shaves interest charges and a few years off your mortgage.

• Ask your lender to remove PMI. You may be able to get rid of your monthly private mortgage insurance charges if you have 20% equity in your home from value increases in your neighborhood. Call your lender and ask them about the process — for the cost of an appraisal you may be able to permanently drop your monthly PMI cost.