Refinancing means getting a new loan to replace your old one. This can lower your monthly payments or help you pay off your loan faster.

First, use a good calculator. It will ask for your loan details and the new rate you hope for. This helps you see how your payments and interest will change.

Check the current rate today against your mortgage rate. The difference is key to deciding if you should refinance.

This guide will show you where you can save money. You'll learn about lowering interest, shortening your loan term, and how closing costs affect your savings. You'll also find out how to get the info you need and use tools like Fannie Mae’s calculators.
?feature=shared">?feature=shared

Key Takeaways

• Refinancing swaps an existing mortgage for a new loan with different terms.
• Use a refinance calculator to estimate monthly and lifetime interest changes.
• Compare today’s market rate against the rate on your current mortgage first.
• Savings come from lower interest, a shorter term, or both—fees change the math.
• Gather credit, income, and payment history before applying to speed approval.

Understanding refinancing and when it makes sense today

A refinance pays off an existing mortgage and replaces it with a new loan that sets fresh terms and a new payment schedule.

Why this matters now: When interest rates fall, you can lower your monthly payments or cut total interest. It also lets you switch from an adjustable-rate to a fixed-rate loan for stability.

Shortening your loan term is a common reason to refinance. Moving from a 30-year to a 15-year mortgage may raise your monthly payments but save on interest. Cash-out refinances are also an option if your home has gained equity.

Deciding whether it makes sense

• Refinancing replaces the old balance and leaves you with new terms and a new payment schedule under the new loan.
• It often makes sense when the market interest rate is meaningfully lower than the interest on the existing mortgage.
• Timing matters: many borrowers see the best results when they’ve paid less than a decade on a 30-year mortgage.

How much you could save by remortgaging your home: use a refinance calculator

Use a simple refinance calculator to convert loan numbers into clear monthly and lifetime outcomes.

Key inputs to enter

• Original loan amount, plus the remaining loan amount if you know it.
• Total term in years (15 or 30) and years already paid.
• Your current interest rate and the new rate you expect.

Step-by-step estimation

Enter those five numbers and run the tool. The calculator will show you the new monthly payment and compare it to your current one.

Interpreting the results

Look at the monthly and lifetime interest changes shown. Small changes in interest or rates can make a big difference, especially early on.

Tip: Model keeping the same remaining term versus restarting a 30-year schedule. This shows if lower payments now mean higher total interest later. Use the outputs for planning and gather underwriting information before requesting quotes.

Closing costs, fees, and your break-even point

Upfront closing costs can erase early gains from a lower rate, so tally them before signing any paperwork.

Typical expenses include:

• Bank or lender charges, origination or processing fees.
• Title search and title insurance, plus recording and tax service fees.
• Appraisal fee, attorney fees where required, and the credit report cost.

Calculate break-even: Add total closing costs and any prepayment penalty on the current mortgage. Then divide that total by your estimated monthly payment savings. The result is the number of months to break even.

Consider whether to pay costs at closing, roll them into the new loan, or accept a slightly higher rate for lender credits. Include small line items—flood certification, recording—so your estimate isn’t off by hundreds of dollars.

Tip: Use a refinance calculator to run best, base, and worst-case scenarios, and compare offers from multiple lenders line‑by‑line on the Loan Estimate.

Factors that impact your savings: interest rates, credit score, equity, and term

Different elements — from credit history to equity — shape the net benefit of a new loan. Lenders review income, employment, debt, payment history, and the details of the current mortgage when they price an offer.

Lower interest rate versus shorter term: trade-offs in payment and total interest

A lower interest rate tends to cut monthly payment and total interest paid. A shorter term raises the monthly payment but usually saves the most on lifetime interest.

Your credit score and qualification requirements

Credit profile drives rate tiers. A higher credit score and steady employment can unlock better refinance terms. Lenders also check credit history depth and on-time records.
?feature=shared">?feature=shared

Home equity considerations and loan-to-value

Higher home equity improves pricing and may remove mortgage insurance. Loan-to-value limits which refinance options are available and affects the final rate and fees.

How many years you’ve paid on a 30-year mortgage

Interest is front-loaded on a 30-year mortgage. If you’ve paid fewer than ten years, a refinance may change results more dramatically than later in the term.

"Balance lower rates against upfront costs to find the option that matches short-term cash flow and long-term goals."

Choosing the right refinance: rate-and-term vs cash-out refinance

Deciding whether to tap equity or just lower the rate shapes the structure of a new loan. A clear goal helps pick between a rate-and-term refi and a cash-out refinance.

Rate-and-term focuses on a better rate, a different term, or both. It aims to lower monthly cost or shorten payoff without drawing cash.

Cash-out refinance increases the loan balance so the borrower receives cash from home equity. That cash can fund remodels, energy upgrades, or debt consolidation. Expect higher payments or more total interest unless a lower rate or shorter term offsets those changes. Appraisals are often required when equity is accessed.

Fixed-rate vs adjustable-rate options

Fixed-rate loans lock steady payments across the term. An ARM may offer lower initial rates but can rise later, affecting long-term costs and risk.

• Review fees and closing costs for each path.
• Check if the existing mortgage has prepayment penalties.
• Model scenarios that keep the same term versus shorten it for clear comparisons.

Next steps: compare lenders, check today’s refinance rates, and start preapproval

Get rate quotes from many lenders before you start preapproval. This helps you see the market clearly. It also lets you lock in a rate at the right time.

Use credible tools like Fannie Mae’s Mortgage Calculator and Loan Lookup Tool. They help you check your loan number and try different scenarios. A good calculator makes sure your numbers are right.

What to prepare

• Compare lenders on rate, APR, points, and fees using Loan Estimates.
• Get ready with pay stubs, W-2s or 1099s, tax returns, bank statements, and your current loan statement.
• Check your credit, fix any mistakes, and don't get new debt. Lenders look at your credit and income history.
• Find out about appraisal waivers but plan for a full appraisal for cash-out or borderline equity cases.
• After picking the best offer, do preapproval online. This speeds up disclosures, appraisal scheduling, and closing.

"Compare offers side‑by‑side and confirm your breakeven number before committing to any mortgage refinance."

Conclusion

Conclude with a clear review of numbers: Look at the target interest rate and monthly payment. Compare them to closing costs and the break-even month. Try scenarios to see how they change your total interest.

Check credit, equity, and documentation before preapproval. Good credit and clean paperwork help get better loan prices. They also avoid surprises at closing.

When everything checks out, lock in the rate on your chosen loan. This way, you can refinance with confidence. A smart plan can boost your cash flow, shorten your mortgage, or use home equity wisely.