Mortgage Refinance Calculator 2026

How Mortgage Refinancing Works

Refinancing replaces your current mortgage with a new loan at a lower interest rate or different term. The key question: Will the monthly savings outweigh the closing costs before you move or sell?

• Rate-and-term refinance: Replace your current loan with a lower rate or shorter term. Most common type.
• Cash-out refinance: Borrow more than you owe and pocket the difference. Good for home improvements or debt consolidation.
• Streamline refinance: Simplified process for FHA, VA, and USDA loans. No appraisal needed in some cases.

The 1% Rule — When to Refinance

The traditional rule says refinance when you can lower your rate by at least 1 percentage point. But this is just a guideline:

• 0.5% savings can make sense on large loans ($500K+) — $150+/month savings adds up fast
• Break-even matters more than rate difference — if closing costs are $4,000 and you save $200/month, you break even in 20 months
• Shorter term = bigger savings — switching from 30-year to 15-year at a lower rate can save $100K+ in interest
• Your credit score affects the rate — a 740+ credit score gets the best refinance rates in 2026

Refinance Closing Costs Breakdown

Expect to pay 2-6% of the loan amount in closing costs:

• Origination fee: 0.5-1% of loan amount
• Appraisal: $300-$600
• Title search & insurance: $700-$2,000
• Recording fee: $25-$250
• Credit report: $30-$50
• Survey: $150-$400 (if required)
• Attorney fee: $500-$1,500 (some states require)

Tip: Some lenders offer "no-closing-cost" refinances — they roll the costs into a slightly higher rate. This can make sense if you plan to move within 3-5 years.

2026 Refinance Rate Outlook

Mortgage rates in 2026 have moderated from 2023-2024 peaks:

• 30-year fixed: 6.2-6.8% (down from 7.5%+ in late 2023)
• 15-year fixed: 5.5-6.2%
• 5/1 ARM: 5.8-6.4%
• FHA 30-year: 5.8-6.3%
• VA 30-year: 5.5-6.0%

If you locked in a rate above 7%, refinancing in 2026 could save you $200-400/month on a $300,000 loan.

Refinance vs. Extra Payments

Sometimes making extra payments on your current loan beats refinancing:

• If your current rate is below 6.5%: Extra payments may beat refinancing after closing costs
• If you plan to move in 2 years: You likely won't break even on closing costs
• If your home equity is below 20%: Refinancing may require PMI, reducing savings
• If you have an FHA loan with MIP: Refinancing to conventional at 20% equity removes MI entirely

Cash-Out Refinance: When It Makes Sense

• Home improvements: Kitchen/bathroom remodels add 60-80% of cost to home value
• Debt consolidation: Replace 18-24% credit card rates with a 6% mortgage rate
• Education expenses: Lower rate than student loans for some borrowers
• Investment property down payment: Leverage home equity for rental income
• Avoid: Cars, vacations, luxury spending — you're securing consumer debt with your home