A home equity loan is a second mortgage against your home, meaning it is a loan that you take out using your home as collateral without paying off your first mortgage. A refinance typically means you’ll pay off your existing first mortgage and replace it with a new first mortgage.

Your decision to refinance should be based on the terms you have on your current mortgage loan. If you can refinance your current loan with a new mortgage at a significantly lower rate and/or decrease your monthly payment, refinancing might be worth considering. Try our mortgage calculators to estimate a new monthly payment using different terms than those on your existing first mortgage.

Refinancing your existing mortgage generally costs 2-3% of the loan amount. Our mortgage calculator can give you an estimate of how much that will be. Our Mortgage Consultants can also work with you to make your estimate more accurate. Calculate your breakeven point by dividing the cost of refinancing by the monthly savings from your refinance. That number represents how many months it will take to break even. If you plan on being in your home for that period of time or longer, you should seriously consider refinancing.

Refinancing for a shorter term or the same term both have advantages. When you refinance for a shorter term, your monthly payment will usually increase, but your mortgage will be paid off sooner. If your budget won’t accommodate a higher payment, it would likely be best to refinance at a 30-year term. If you refinance your existing 30-year mortgage for another 30-year term at a lower rate, your monthly payment will be lower and you always have the option to make extra payments against the principal.