Do I have to start over at 30 years?
Ask for a term close to what you have left. That gives you a way to compare rates and fees with about the same payoff date.
Should You Refinance If the Payment Drops But the Loan Starts Over?
AI illustration of a South Carolina home.
A refinance can be worth it if you need a lower bill now and can live with the extra cost. If your goal is to save money, check how much the new loan costs by the time you plan to sell, refinance again, or pay it off. A fresh 30-year loan can shrink your payment and give you more years of interest to pay. See the CFPB’s guide to the tradeoffs of refinancing.
What will you pay to refinance?
Start with your latest mortgage statement. Write down your balance, rate, payment and time left. Use the part of your payment that covers the loan balance and interest. If you pay mortgage insurance, write that down on its own. For the actual closing, ask the company that collects your payments for a payoff quote for that date.
Next, get a written Loan Estimate for the new loan. Page 1 shows the new amount, rate, term and payment. On page 2, look for the lender charges, title fees and any points. Points are fees you pay to get a lower rate. Check for lender credits too. A credit cuts the cash you need at closing and may come with a higher rate. See where to find these costs on a Loan Estimate.
Set aside a line for the full cash you need at closing. That may include money to start an account for taxes and insurance. Ask which charges are new costs of taking out the loan, which are bills you’d pay either way, and which costs are added to the new balance. See how lenders cover costs on a “no closing cost” refinance.
How long will it take the lower payment to cover the fees?
Use this worksheet for a refinance with no cash out. Pick a date you think you might sell or refinance again. If you’re unsure, run the numbers for two dates.
- Write down the drop in your monthly payment. Compare the part that pays down the loan and covers interest. Include changes in mortgage insurance if it applies, and ask when that charge ends. Compare taxes and home insurance on their own.
- Divide cash fees by the monthly drop. Take the loan fees you pay in cash after any credits and divide by the amount your payment drops. That gives you a rough number of months to make back the cash. This quick check works when the savings stay steady and you pay all fees in cash.
- Compare what you’ll have paid and still owe on your date. For each loan, add up the loan payments through that date, any mortgage insurance, any loan fees you pay in cash and the balance still due. Compare the totals. If fees went into the new loan, its payments and balance already reflect them.
Try the refinance calculator for a first look at the payment and fee payback. Ask for a payment schedule for each loan so you can see how fast each balance falls. Page 3 of the new Loan Estimate can also help you compare the cost of new offers over five years. If you’re staying long term, ask for the interest and fees through the end of each loan too.
What can a fresh 30-year loan cost?
Suppose you owe $250,000 and have 20 years left. A new 30-year loan drops your bill by about $368 a month. If you pay $5,000 in fees at closing, that drop covers the fees in about 14 months. Here’s what happens when you compare the balances too.
| What to compare | Keep current loan | New 30-year loan | New 20-year loan |
|---|---|---|---|
| Fixed rate | 6.25% | 5.75% | 5.75% |
| Monthly loan payment | $1,827 | $1,459 | $1,755 |
| Fees paid in cash | $0 | $5,000 | $5,000 |
| Balance after five years | $213,118 | $231,905 | $211,367 |
| Interest and fees over five years | $72,757 | $74,441 | $71,679 |
| Interest and fees from now to payoff | $188,557 | $280,216 | $176,250 |
Example rates and costs are for learning. All three loans start at $250,000 and use the payments due each month. Figures are rounded and leave out taxes and insurance. The example assumes no cash out, mortgage insurance, credits, fees added to the balance, or extra payments.
After five years, the new 30-year loan would cost about $1,700 more in interest and fees than keeping the old loan. If you kept it to payoff, it would cost about $92,000 more. The new 20-year loan offers a smaller drop in the bill and costs about $1,100 less over five years. Ask what rate and fees you’d get for each term.
Common questions about a refinance that starts the loan over
Should I pay points for a lower rate?
Ask for two offers with the same term, one with points and one without. Compare what the points cost with what the lower rate saves by the time you expect to be done with the loan. See the CFPB’s guide to points and credits.
What if I mainly want a smaller bill?
Decide how much room you need in your budget each month. Then ask how much more you’ll pay for that room and how long you’ll be in debt. A shorter term may lower the bill enough without adding years.
More help with your refinance
South Carolina refinance loans
Explore ways to change your rate, payment or loan term.
Hilton Head Island refinance loans
See what to ask if you’re refinancing a home or condo on the island.
Myrtle Beach refinance loans
Review refinance choices for a Myrtle Beach home or condo.
If your main goal is to get cash from your home, run that choice on its own. A home equity loan or a home equity line of credit (HELOC) can let you keep your current mortgage and borrow what you need in a separate loan. Compare those costs with a cash-out refinance.
Get straight answers about your refinance
Tell us what you owe, your rate and how much time is left on the loan. If you have a written offer, share the new rate, term and fees. We can run the numbers with you. See what it costs to keep your loan, start a new one, or borrow from your equity with a separate loan. Then you can choose what fits your plans.
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