Should I Refinance My Mortgage?

To calculate, input the terms of your current loan and the proposed new loan, then Let the calculator do the rest.

Understanding Mortgage Refinancing

Mortgage refinancing involves replacing your current mortgage with a new one, typically with different terms. This can include a lower interest rate, a different loan term (e.g., going from a 30-year mortgage to 15 years), or switching from an adjustable-rate to a fixed-rate mortgage.

Keep in mind, refinancing is not necessarily a smart decision for every person and in every situation. It depends on what your financial goals are — things like paying off debt, building wealth, and planning for retirement. For example, refinancing to a shorter loan term can help you build equity faster, while refinancing to a lower monthly payment can free up cash for other financial priorities.

Deciding whether or not to refinance also depends on the details of your existing loan, the current interest rate environment, costs for refinancing, and more, including:

1. Interest rate changes: A significant drop in interest rates since you took out your original mortgage can make refinancing attractive.
2. Credit profile shifts: Improvements in your credit score can qualify you for better loan terms.
3. Closing costs: Refinancing involves costs that can range from 2% to 5% of the loan amount. You'll need to factor these into your decision.
4. Loan duration: Consider how long you plan to stay in your home, as this affects your break-even point, the time it takes for the savings from refinancing to offset the closing costs. If you’re planning a move in the near future or close to paying off your loan, refinancing may not be the best financial move.

To determine if refinancing is right for you, you’ll want to weigh the benefits against the costs.