The published rules
These are programme rules, not Plinth policy. Where a figure is reset each year — conforming limits, FHA county limits, the USDA fee, the VA fee table — the mechanism is described and the number is not, because a stale number on a lending page is worse than no number.
- Two kinds
- Rate-and-term changes the rate, the term or both without taking money out. Cash-out increases the balance and hands you the difference. They are priced differently and underwritten differently.
- Cash-out limits
- Conventional cash-out refinances are generally limited to 80% of the value of the home. VA and FHA have their own cash-out rules.
- Streamlined versions
- An existing FHA loan may qualify for an FHA Streamline refinance, with reduced documentation and usually no appraisal, subject to a net tangible benefit test. An existing VA loan may qualify for an Interest Rate Reduction Refinance Loan, the IRRRL, which carries a reduced funding fee.
- Your right to cancel
- Refinancing your principal residence carries a three business day right of rescission under the Truth in Lending Act. You can walk away after signing. A purchase carries no such right.
- The clock restarts
- A new 30-year loan is a new 30-year schedule. A lower payment spread over a longer period can cost more in total interest than the loan you left, even at a lower rate. Compare total interest and break-even, not the payment.
What it will not do
- Closing costs are real whether they are paid in cash or rolled into the balance. Rolling them in does not make them free, it makes them financed.
- If you are likely to move inside the break-even window, refinancing loses money. That is the whole point of the calculator.
What to find out before you go further
- 01How many months until the costs are paid back by the saving.
- 02How long you actually expect to keep the house.
- 03Whether a shorter term, rather than a lower rate, is the thing you want.