How is the break-even point calculated?
Break-even is closing costs divided by monthly savings. If you pay $5,000 in fees to drop your payment by $250/month, your break-even is 5,000 ÷ 250 = 20 months. Past that, every month of staying in the loan is net savings. Selling or refinancing again before break-even means you lost money on the refi.
When does refinancing actually make sense?
Three things usually need to be true: the new rate is at least 0.5%–1.0% below your current rate, you plan to stay in the home well past the break-even point, and your credit and equity qualify for the best-pricing tier. If any one of those is missing, run the calculator anyway — the lifetime numbers may still favor it for term-shortening or cash-out goals.
What's the difference between rate-and-term and cash-out refinancing?
A rate-and-term refinance replaces your loan with a new one at a different rate or term but the same balance — the goal is lower cost. A cash-out refinance pays off the old loan and borrows extra, giving you the difference in cash. Cash-out rates are usually 0.125%–0.5% higher, and lenders typically cap combined loan-to-value at 80%.
Will refinancing hurt my credit score?
A refinance triggers a hard inquiry, which usually drops your FICO score by 5 points or fewer. The credit bureaus' rate-shopping window (14–45 days depending on the model) lets you compare multiple lenders as a single inquiry. Scores typically recover within a few months as the new account ages.
Do I have to re-pay PMI when I refinance?
Only if your new loan is above 80% loan-to-value. If your equity has grown so the new balance is at or below 80% of the appraised value, no PMI applies on a conventional refinance — even if you originally paid PMI. A cash-out refi that raises the loan above 80% LTV will trigger PMI on the new loan.
What is a no-closing-cost refinance?
It's a refinance where the lender covers the closing costs in exchange for a higher interest rate, typically 0.25%–0.5% above the rate you'd get if you paid the fees yourself. Run both scenarios — for a short expected stay, no-cost often wins; for staying many years, paying the fees and taking the lower rate usually wins.
How long does the refinance process take?
Most refinances close in 30–45 days from application. Streamline refinances (FHA, VA IRRRL) can be faster because they skip appraisal and full income re-verification. Delays usually come from appraisal scheduling, title issues, or the lender's underwriting backlog rather than the borrower.
What's an FHA streamline or VA IRRRL refinance?
Both are simplified refinance programs for existing FHA or VA borrowers. They drop the rate without a full credit re-underwrite, often without an appraisal, and with lower fees. The trade-off is they only reduce rate-and-term — no cash-out — and they require that the refinance produce a 'net tangible benefit' (lower payment or shorter term).
What are typical closing costs on a refinance?
Expect 2%–5% of the loan amount. On a $300,000 refinance that's $6,000–$15,000, covering origination, appraisal ($500–$700), title insurance, recording fees, prepaid escrow, and any discount points. Compare the Loan Estimate (a federally standardized form) from at least three lenders before locking.
Should I roll closing costs into the new loan?
You can, but the math gets worse. Rolling $6,000 into the loan at 6% over 30 years adds about $36/month and roughly $7,000 in lifetime interest. If you have the cash, pay upfront. If rolling them in is the only way to refinance and your break-even still clears comfortably, it's an acceptable trade — just add the rolled-in fees to the closing costs input to see the honest break-even.
