Refinance Calculator

When does refinancing make sense?

Refinancing replaces your mortgage with a new one — usually to get a lower rate and a lower monthly payment. But it costs money upfront (closing costs), so the question is: how long until the monthly savings pay back those costs? That's your break-even point. If you'll stay in the home longer than the break-even, refinancing likely makes sense. Watch one trap: stretching back out to a fresh 30-year term lowers the payment but can increase total interest — the calculator shows that too.

How this is calculated

We compute your current monthly payment (from your balance, current rate, and remaining term) and your new payment (balance over the new term and rate). The difference is your monthly saving. Break-even months = closing costs ÷ monthly saving. Lifetime savings compares the total you'd pay on each path, including closing costs. Taxes and insurance are excluded — this is principal-and-interest only.

Educational estimate, not financial advice — see our disclaimer.

Understanding your break-even point

The break-even point is the single most useful number when deciding whether to refinance. It answers a simple question: how many months of lower payments does it take to earn back the upfront cost of the new loan? The math is straightforward — divide your total closing costs by the monthly savings from the new payment. If a refinance costs you a few thousand dollars but trims a couple hundred off your payment each month, you'll cross break-even somewhere in the first year or two. The key takeaway is that the savings only become real after you pass that point. If you sell or move before then, you may actually lose money on the deal.

A refinance example

Imagine you owe $250,000 and your current payment (principal and interest) is $1,580 a month. You refinance into a new loan with a lower rate, and your new payment drops to $1,430 a month. That's a monthly saving of $150. The lender quotes $6,000 in closing costs. Dividing $6,000 by $150 gives a break-even of 40 months — about three and a third years. If you plan to stay in the home well past that point, the refinance pays for itself and keeps saving you money afterward. If you might move in two years, the numbers don't work in your favor.

The reset-term trap

A lower monthly payment feels like a win, but it can hide a real cost. If you're five years into a 30-year mortgage and refinance into a brand-new 30-year term, you've quietly stretched your repayment from 25 remaining years back out to 30. The smaller payment may still mean you pay more total interest over the life of the loan because you're borrowing for longer. One way to avoid this is to refinance into a shorter term — say a 20-year or 15-year loan — so you capture a lower rate without restarting the clock. You can also keep the new 30-year payment but pay extra toward principal each month. Our mortgage payoff calculator can show how those extra payments shorten your timeline.

Costs and factors to watch

• Closing costs: these typically run around 2%-5% of the loan amount and cover appraisal, origination, title, and other fees.
• Your credit score: a stronger score usually unlocks better rates, so it pays to check and improve it before you apply.
• How long you'll stay: the longer you keep the home past break-even, the more a refinance benefits you.
• Cash-out vs. rate-and-term: a rate-and-term refinance simply swaps your loan for a better one, while a cash-out pulls equity out and increases your balance.

Common mistakes to avoid

• Chasing a low rate while ignoring costs: a headline rate means little if high closing costs push your break-even years out.
• Extending the term blindly: resetting to a fresh 30 years can raise total interest even when the monthly payment falls.
• Not shopping multiple lenders: rates and fees vary, so compare a few offers before committing to one.