Average Cost to Refinance Home Equity

This calculator estimates the monthly payment and total interest for a fixed-rate loan used to refinance home equity, based on the amount borrowed, APR, and term you enter. It does not calculate closing costs or determine whether refinancing is appropriate; ask a lender for a fee estimate and enter the actual loan terms for a more relevant payment estimate.

Formula

The calculator uses the standard amortizing-loan payment formula. It assumes a fixed APR and equal monthly payments over the stated term:

• Monthly payment: M = P × r ÷ [1 − (1 + r)⁻ⁿ]
• Total interest: I = (M × n) − P

Here, P is the loan amount in dollars, APR is the annual percentage rate entered as a percentage, r is the monthly rate as a decimal (APR ÷ 1,200), n is the number of monthly payments (years × 12), M is the monthly principal-and-interest payment in dollars, and I is the total interest in dollars over the full term. The payment is rounded to cents for display; total interest uses that displayed payment.

Worked Example

Using the calculator’s defaults—$20,000, 8% APR, and 5 years:

1. Convert the annual rate to a monthly decimal: 8 ÷ 1,200 = 0.0066667.
2. Convert the term to payments: 5 × 12 = 60 months.
3. Substitute into the payment formula: $20,000 × 0.0066667 ÷ [1 − (1.0066667)⁻⁶⁰] = $405.53 per month, rounded to cents.
4. Calculate interest using the displayed payment: ($405.53 × 60) − $20,000 = $4,331.80.

These are principal-and-interest estimates. A real payment can differ if the loan has a different rate, term, payment schedule, or costs added to the balance.

Assumptions

• The interest rate is fixed for the entire loan term.
• Payments are equal, made monthly, and begin one month after the loan starts.
• Interest compounds monthly using APR ÷ 12.
• The calculation excludes closing costs, lender fees, taxes, insurance, mortgage insurance, escrow, and any charges or old debt rolled into the loan.

What Does It Cost to Refinance Home Equity?

There is no single average cost that applies to every home-equity refinance. The total depends on the transaction, lender charges, property-related services, location, and whether costs are paid upfront or added to the new loan. The calculator above estimates repayment and interest, not those transaction expenses. For an actual estimate, request a written breakdown from the lender and compare its line items rather than relying on a broad average.

“Refinance home equity” can refer to different transactions. A homeowner might replace an existing mortgage with a new mortgage that provides cash, or refinance an existing home-equity loan or line of credit. Those arrangements can have different balances, terms, and fees. Clarify which debt is being replaced and whether the proposed amount includes cash proceeds, unpaid interest, or transaction costs.

Some costs may relate to processing and underwriting; others may pay for services such as an appraisal, title work, recording, or other required checks. The specific charges and who pays them vary. A quote labeled “no closing costs” does not necessarily mean the services are free: costs may be covered through a different rate or incorporated into the balance. Ask how each charge is handled and whether the quoted loan amount includes it.

How to Estimate Your Total Cost

Separate the cost of obtaining the new loan from the cost of borrowing over time. A practical comparison needs both, because a lower monthly payment can result from extending repayment rather than reducing the overall expense.

1. Get the loan details. Ask for the proposed amount, APR, term, estimated closing costs, and monthly payment. Confirm whether the amount pays off existing debt and whether fees are financed.
2. Enter the proposed amount, APR, and term in the calculator. Use the actual figures from the quote; the defaults are examples only.
3. Record transaction costs separately. Add the lender’s quoted charges to your comparison, taking care not to count a financed fee twice if it is already included in the loan amount.
4. Compare the remaining repayment period. Consider how long you expect to keep the loan and how much principal and interest would be paid over that period, not only the scheduled monthly payment.

For example, the default loan produces a $405.53 monthly principal-and-interest payment and $4,331.80 in interest over five years, before transaction costs. If a hypothetical $1,000 cost were paid upfront, it would be separate from those figures; if it were added to the balance, the amount entered as the loan principal would instead be higher. This illustration shows why the treatment of fees matters, not what a refinance should cost.

Home Equity Loan Refinance vs. Cash-Out Refinance

Refinancing a home-equity loan generally means replacing that borrowing with another loan secured by the home. A cash-out refinance typically replaces an existing mortgage with a larger one and makes some of the difference available as cash, subject to the transaction’s terms. The terminology and available structures vary, so verify exactly which debts are being paid and what new obligation is created.

In either case, a payment-only comparison can be misleading. A longer term may lower the monthly payment while increasing the time interest accrues. A new loan may also restart the repayment schedule. Compare the new balance, rate, remaining term, transaction costs, and total payments over the period you expect to carry the debt. The calculator cannot make that comparison by itself because it does not know your current loan’s remaining balance, payment schedule, or payoff costs.

Common Cost and Calculator Mistakes

• Confusing equity with cash available. Home equity is not automatically the amount a refinance will provide. The new loan must account for debt being paid off and any costs or conditions in the lender’s offer.
• Looking only at the payment. A lower monthly figure may reflect a longer term, not lower overall borrowing cost.
• Entering the wrong balance. Use the proposed new principal, not the home’s value or the amount of equity, unless that is specifically the quoted loan amount.
• Mixing APR and monthly rates. Enter APR as a percentage per year—for example, 8 for 8%, not 0.08 or 0.00667. The formula converts it to a monthly rate.
• Forgetting excluded charges. Taxes, insurance, escrow, fees, and any other loan costs are not included in the calculator’s payment or interest figures.

The formula is designed for a fixed rate and regular level monthly payments. It is not a payoff quote, an approval estimate, or a full closing-cost calculator. Variable rates, irregular payment timing, prepayment, and charges financed into a loan require details beyond these inputs.

Frequently Asked Questions

What is the average cost to refinance home equity?
There is no universal average: costs depend on the type of refinance, lender, property-related services, and how fees are paid. Request an itemized estimate for the specific transaction; this calculator does not supply a market average.

Does this calculator include closing costs?
No. It calculates monthly principal and interest and total interest from the loan amount, APR, and term. Add quoted transaction costs separately, or include them in the principal only if the lender’s proposed loan actually finances them.

Does refinancing home equity lower the monthly payment?
Not necessarily. The payment depends on the new balance, APR, and term. A longer repayment period can reduce the monthly amount while extending borrowing time, so compare total payments and costs as well.

Are home-equity loan refinancing and cash-out refinancing the same?
No. They can involve different existing debts and loan structures. Ask the lender which balances the new loan will repay, whether it replaces a mortgage, and how any cash proceeds and fees are treated.

What numbers should I enter?
Use the proposed new loan principal in dollars, APR as a yearly percentage, and term in years. Obtain the actual figures from the lender; the calculator’s defaults are only an example.

This result is an estimate, and the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2