Refinance versus extra mortgage principal

These two moves get bundled in headlines. They are not the same transaction, they do not share a form, and a calculator cannot choose between them for you.

A refinance replaces your current note with a new one. Closing costs, a new rate, a new term, and a new Loan Estimate come with it. Whether that is cheaper depends on those documents, not on a national average. The old loan is paid off; the new one starts its own amortization. Points, origination, title, and prepaid interest sit on the refinance side of the ledger. A lower rate on a longer term can still cost more interest over the life of the loan. The estimate is the place to see that, not a blog table.

Extra principal is a payment choice on the loan you already have. You are not shopping a new product. You are changing how fast the current balance declines, if the servicer applies the extra amount to principal as the note allows. A calculator can show how extra principal shortens the schedule. It cannot tell you whether you still need the cash for a repair, a medical bill, or a job gap. Interest saved on a 30-year loan is real; it is also slow, and it does not spend like cash.

Prepayment penalties, ARM resets, and escrow changes sit in the current loan documents. Closing costs sit on the refinance estimate. DontPanic will not tell you which lever to pull. The useful split is paperwork: one path is a new loan, the other is a payment instruction on the loan you already signed.

If you model a payment, use the rate on the paper in front of you — a quote, a Loan Estimate, or the note. This site does not invent a market mortgage rate. National averages move. Your number is the one on the page you can keep.

Liquidity still belongs in the frame. Extra principal you cannot reverse is a weaker buffer than cash in an account you can actually withdraw. That is a description of timing, not a recommendation to hoard or to prepay.

Not a recommendation to refinance, and not a recommendation to prepay.