Conventional Refi Calculator

Refinancing typically makes sense when you can secure a rate at least 0.5% to 0.75% lower than your current rate and you plan to stay in the home long enough to recoup closing costs. The key metric is the break-even point — the number of months it takes for your cumulative monthly savings to exceed the total cost of refinancing. If you plan to move or sell before reaching break-even, refinancing may cost you more than it saves. Other good reasons to refinance include removing PMI once you have 20% equity, switching from an adjustable-rate to a fixed-rate mortgage, or shortening your loan term to pay off your home faster.

Private Mortgage Insurance (PMI) is required on conventional loans when the loan-to-value ratio exceeds 80%. If your home has appreciated or you have paid down your balance enough to reach 20% equity, refinancing into a new conventional loan eliminates the PMI requirement entirely. This can save borrowers $100 to $300 or more per month depending on loan size and original LTV. Even if rates are similar, removing PMI alone can produce significant monthly savings. You can also request PMI cancellation on your existing loan without refinancing once you reach 80% LTV, but refinancing lets you lock in a better rate at the same time.

Break-even is calculated by dividing your total refinancing costs — including closing costs, points, and any fees — by your monthly payment savings. For example, if refinancing costs $6,000 and saves you $200 per month, your break-even point is 30 months. After 30 months, every dollar saved is pure benefit. This calculation assumes you stay in the home and keep the loan; if you sell or refinance again before break-even, you lose money on the transaction. A good rule of thumb is to target a break-even period of 24 months or less, though longer periods can still make sense if you plan to stay in the home for many years.