Refinance Calculator.

Calculate Mortgage Refinancing

Are you thinking of refinancing your home? Use this calculator to discover how much you can save today.

Loan Information
Amount
Old Home Loan
Home Value
$
Original APR
%
Original Loan Amount
$
Original Loan Term
years
Months Remaining
months
New Refinance Loan
New APR
%
New Amount
$
New Term
years
Refinancing Closing Costs
Discount Points
%
Origination Points
%
Other Closing Costs
$
Old Loan
New Loan

$1,580.17

Old Monthly P&I Payment

$1,049.33

New Monthly P&I Payment

$211,940.32

Old Loan Balance

$200,000.00

New Loan Balance

$568,861.22

First Loan Total Cost

$382,759.06

New Loan All-in Cost

$167,300.50

Old Loan Remaining Interest

$177,759.06

New Loan Total Interest
(+ closing costs of $5,000.00)

$530.84

Monthly Refi Savings

$4,000.00

Discount Points Cost

$1,000.00

Other Closing Costs

$5,000.00

Total Closing Costs

What is Refinancing?

Refinancing is when a homeowners takes out another loan which is used to pay off their first mortgage & any secondary liens on their home. Mortgage refinancing allows homeowners to leverage the equity in their home to improve their personal finances.

How Are These Loans Typically Used?

Common use cases include:

Home Equity Uses.

How Common is Refinancing?

Before the 2008/2009 financial crisis most homeowners either moved or refinanced their loans about once every 7 years. Since the recession a greater share of output has went to capital while a lower share has went to labor. In uncertain labor markets homeowners with debt are more likely to stay in place longer.

Rates have been falling on a secular basis for over 3 decades. If rates fall significantly homeowners can refinance to lock in a lower rate. That, in turn, drives down their monthly payments and interest expenses.

Refinancing a home still has closing costs, so typically rates need to fall about a half-percent to cover the closing costs and help a homeowner save money.

If interest rates rise homeowners have little financial incentive to refinance their homes unless they have an adjustable-rate loan & they think the rates will rise further. In that case they might choose to switch from an ARM to a FRM.

When the mortgage market is booming about 70% of mortgages are refinances. When interest rates are rising and loan volume stagnates then the market may flip in the other direction to where about 70% of loans are for home purchases. In June 2018 29% of mortgages were refis.

The vast majority of the US residential mortgage market uses fixed-rate loans in low-rate environments & most of those loans use a 30-year term. In June 2018 the average 30-year note rate was 4.92%, which is still quite low based on historical averages.

When interest rates jump sharply - as they did in the early 1980s - consumers typically shift preferences toward adjustable-rates. As of June 2018, 6.9% of all home loans are structured using ARMs. ARMs are relatively uncommon for VA (0.5%) & FHA (0.6%) loans, while slightly more common among conventional home loans (7.6%).

As of the end of Q1 in 2018 there is an estimated 138 million housing units across the United States & the total value of all U.S homes is $31.8 trillion. As of Q1 2018 there is about $15 trillion in outstanding mortgage debt across the United States, slightly surpassing the 2008 peak of $14.8 trillion.

United States Home Ownership Statistics

According to the 2012-2016 American Community Survey 5-Year Estimate the housing stock is broken down as follows

Housing Type
Quantity
Percent
total housing units
134,054,899
100%
occupied housing units
117,716,237
87.81%
vacant housing units
16,338,662
12.19%
homeowner vacancy rate
1.8%
rental vacancy rate
6.2%
single unit detached
82,631,864
61.6%
single unit attached
7,812,612
5.8%
two units
4,961,792
3.7%
owner-occupied
74,881,068
63.6%
renter-occupied
42,835,169
36.4%

Home Loans.

Among the owner-occupied properties with mortgage debt, the breakdown is as follows

Housing Type
Quantity
% w Mortgage
% Owner Occupied
% of Occupied
% of Total
total housing units
134,054,899
100%
renter or owner occupied
117,716,237
100%
87.81%
renter occupied units
42,835,169
36.39%
31.95%
total owner-occupied
74,881,068
100%
63.61%
55.86%
>> no mortgage
26,864,528
35.88%
22.82%
20.04%
>> with mortgage
48,016,540
100%
64.12%
40.79%
35.82%
>>> second mortgage or home equity loan, not both
7,437,821
15.49%
9.93%
6.32%
5.55%
>>>> second mortgage only
1,722,772
3.59%
2.30%
1.46%
1.29%
>>>> home equity loan only
5,715,049
11.90%
7.63%
4.85%
4.26%
>>> both second mortgage & home equity loan
281,865
0.59%
0.38%
0.24%
0.21%
>>> no second mortgage & no home equity loan
40,296,854
83.92%
53.81%
34.23%
30.06%

Should I Refinance My Mortgage?

Is it Harder to Buy a Home or Refi?

Typically refinancing is easier than purchasing a home as the lender has higher profit margins due in part to fewer parties engaged in the transaction & relying on some of the work done on the original mortgage.

Should I Refi or Get an Equity Loan?

Home equity loans & home equity lines of credit (HELOC) are both treated similarly to a mortgage in that they are liens on the property. However, there are some substantial differences between the three options.

Refi

Refinancing makes sense if you are certain you will live in the home for years to come and you want to withdraw a significant amount of equity or are pushing to significantly lower the interest rate on your existing loan. Refinancing is similar to a purchase mortgage in terms of having a significant upfront cost in terms of both time and money.

Home Equity Loans

Home equity loans are far easier to obtain than a full on refinance & they have a far lower upfront expense as only a portion of the home's equity is being converted to cash.

Typically banks will allow homeowners to withdraw somewhere between 70% to 95% of their home's total value, depending on their credit score and other factors. The ratio of debt to home price is called loan to value (LTV).

If a home is worth $250,000 and it had a first mortgage with $150,000 of debt on it that would leave $100,000 in remaining equity. At 70% of the home's value a homeowner could cash out an additional $25,000 on top of the $150,000 they owe on their first mortgage. At 95% a homeowner could cash out up to $87,500.

Home equity loans are typically structured as a fixed upfront loan amount which then charges a fixed-rate of interest & fixed payments that amortizes over a fixed-term like 5 or 10 years.

Home Equity Lines of Credit

Home equity lines of credit act similarly to a credit card. A homeowner is authorized to borrow up to a cap or limit over some period of time like 5 years. Each time the money is repaid the cap still remains & can be used again.

Homeowners are not charged any interest until they draw on the line & then they are charged a variable rate which changes as the broader market changes.

This option gives homeowners maximum flexibility without the upfront costs associated with a refinance & without the need to pay interest until they draw on the line.

Hybrid Equity Loans

Some banks offer hybrid equity products where a portion of the balance is treated as a home equity loan & there is an additional cap which can be used to withdraw further equity on a credit line.

Do Refinanced Loans Charge Closing Costs?

All mortgages come with loan origination & closing costs. If a loan is marketed as having "no closing costs" then the associated costs are typically rolled into the interest rate charged on the loan. For instance, a person might get a 4.5% 30-year mortgage with $3,000 in closing costs, or a "no cost" home loan with the interest rate set at 4.75%.

Typical fees are highlighted in the following table.

Fee
Description
Cost
Application fee
processing the loan & checking the credit report
$75 to $300
Loan origination
lenders & brokers charge this fee to evaluate & prepare loans
0% to 1.5% of the loan amount
Discount points
a pre-paid interest fee for buying access to a lower interest rate for the duration of the loan
~ 1% of the loan amount to lower interest rate 1/4%
Appraisal fee
Verify the value of the property.
$300 to $700
Inspection fee
Verify the property does not have structural damage or termites.
$175 to $350
Attorney review / closing
Lenders typically pass the fee for legal reviews onto the borrower.
$500 to $1,000
Homeowner's insurance
Policy covering physical damages to protect the lender's investment. Some areas with elevated flooding risk may also require separate flood insurance.
$300 to $1,000 per year
PMI
Conventional home loans with less than 20% down typically require property mortgage insurance to protect the lender. Governmental loan programs like the Federal Housing Administration (FHA), Veterans Affairs (VA), or Rural Development Service (RDS) also typically charge an upfront or recurring insurance fee.
0.5 to 1.5% per year
Title search & insurance
Searching the property records to verify the rightful owner & look check for liens.
$700 to $900
Survey fee
Confirm the location of the buildings on the property.
$150 to $400
Prepayment penalty
Some lenders charge a fee when homeowners pay off their loans early.
$1 to 6 months interest

On average you can expect fees to run around $2,500 to $3,800 based on the value of the home & which loan options you chose.

Understanding Your Break Even Point

Lowering the interest rate on a home can save a homeowner money over the long run, but it can take years to offset the initial closing costs on the loan. The following table can help homeowners work through if refinancing is right for them.

Example
Your loan
Current Payment
$1,580
Subtract New Payment
$1,375
Monthly Interest Savings
$205
Subtract your tax rate as a decimal (25% = 0.25) from 1
0.75
Multiply monthly savings & above fraction
$205 * 0.75
After tax monthly savings
$153
Loan fees & closing costs
$2,800
Prepayment penalty on current loan
$0
Add prepayment penalty to loan fees & closing costs
$2,800 + $0
Divide closing costs + prepayment penalty by monthly savings
$2,800 / $153
Months to break even
18 months

The above example presumes the following:

Other Considerations

Finances and Family Plans.

Beyond a loan's break even point, homeowners should also consider their situation when debating if a refinance makes sense.

Mortgage Market Statistics

A software company named Ellie Mae powers the loan application process for many lenders. Here are their average side-by-side average credit score, loan-to-value & debt to income ratio statistics for closed purchases and refinances from the June 2018 version of the Origination Insights Report.

Total Market

Loan Type
Purchase
Refinance
All
FICO
731
713
726
LTV
85
68
80
DTI
25/39
26/41
26/39
Closing rate
75.0%
63.3%
70.5%
Time to close
44 days
37 days
42 days
Share
71%
29%
100%

Conventional Mortgages

Loan Type
Purchase
Refinance
All
FICO
753
726
745
LTV
80
63
75
DTI
24/36
26/40
25/37
Closing rate
75.2%
64.1%
70.4%
Time to close
43 days
37 days
41 days
Share
69%
31%
66%

FHA Loans

Loan Type
Purchase
Refinance
All
FICO
677
658
673
LTV
95
79
92
DTI
28/44
28/43
28/44
Closing rate
72.1%
58.0%
68.3%
Time to close
44 days
37 days
43 days
Share
81%
19%
20%

VA Loans

Loan Type
Purchase
Refinance
All
FICO
711
691
706
LTV
98
90
96
DTI
27/43
27/42
27/43
Closing rate
54.7%
78.3%
67.5%
Time to close
47 days
44 days
46 days
Share
77%
23%
10%

 

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