Refinance Calculator – Should I Refinance – Realtor.com® (2024)

FAQs

At what point is it not worth it to refinance? ›

Moving into a longer-term loan: If you're already at least halfway through the loan term, it's unlikely you'll save money refinancing. You've already reached the point where more of your payment is going to loan principal than interest; refinancing now means you'll restart the clock and pay more toward interest again.

To calculate the value of refinancing your home, compare the monthly payment of your current loan to the proposed payment on the new loan. Then use an amortization schedule to compare the principal balance on your proposed loan after making the same number of payments you've currently made on your existing loan.

Mortgage calculators provide general estimates based on the information you input, such as loan amount, interest rate, and loan term. While they offer a close approximation, keep in mind that actual payments may vary based on factors like taxes, insurance and interest rates.

The basics of the 1% rule of thumb is that if you reduce your current interest rate by 1% or more on a refinance, you'll save money. The good news is that's true. The even better news is that you can potentially save a lot of money even if you can drop your mortgage rate less than 1% of many loans.

Key Takeaways. Don't refinance if you have a long break-even period—the number of months to reach the point when you start saving. Refinancing to lower your monthly payment is great unless you're spending more money in the long-run.

MBA: Rates Will Decline to 6.1% In its March Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.

So, for example, being able to save over $250 per month with a 1% drop in mortgage rates could make refinancing very attractive. But if closing costs eat into that too much and you don't plan on keeping your mortgage for long enough to overcome that, then you might be better off waiting.

As a rule of thumb, experts often say that it's not usually worth it to refinance unless your interest rate drops by at least 0.5% to 1%. But that may not be true for everyone. Refinancing for a 0.25% lower rate could be worth it if: You are switching from an adjustable-rate mortgage to a fixed-rate mortgage.

Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.

Monthly payments on a $550,000 mortgage

At a 7.00% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $3,659 a month, while a 15-year might cost $4,944 a month.

Are Realtor com monthly estimates accurate? ›

Are Realtor.com Estimates Accurate? Sometimes, it's accurate, but it's not true 90% of the time. When you compare agents with houses that are available for sale, you'll be able to get more precise information. It has the most recent data available.

According to the 28/36 rule, you should spend no more than 28% of your gross monthly income on housing and no more than 36% on all debts. Housing costs can include: Your monthly mortgage payment. Homeowners Insurance.

Home equity requirements by loan type

Conventional refinance: For conventional refinances (including cash-out refinances), you'll usually need at least 20 percent equity in your home (or an LTV ratio of no more than 80 percent). This also helps you avoid private mortgage insurance payments on your new loan.

Refinancing will hurt your credit score a bit initially, but might actually help in the long run. Refinancing can significantly lower your debt amount and/or your monthly payment, and lenders like to see both of those. Your score will typically dip a few points, but it can bounce back within a few months.

A rule of thumb says that you'll benefit from refinancing if the new rate is at least 1% lower than the rate you have. More to the point, consider whether the monthly savings is enough to make a positive change in your life, or whether the overall savings over the life of the loan will benefit you substantially.

The main benefits of refinancing your home are saving money on interest and having the opportunity to change loan terms. Drawbacks include the closing costs you'll pay and the potential for limited savings if you take out a larger loan or choose a longer term.

Bottom line. A mortgage refinance can be an excellent way to save money. But if the rates are too high — or you've been turned down — it might not be something you can take advantage of. Explore other ways to bring down your mortgage payment and see which makes the most sense for your situation.

Refinancing a home loan with negative equity is more complicated than a standard refinance. Under most circ*mstances, a lender cannot loan you more money than your home is worth. This means that if your home has negative equity, your lender might require you to bring cash to closing to make up the difference.

You could face a prepayment penalty.

Some lenders charge you a hefty fee — known as a prepayment penalty — if you pay off your loan in the first few years of borrowing it. Your new loan pays off your old mortgage when you refinance, so if that would trigger a penalty, you'll pay more than expected for your refi.