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The calculator takes your current loan balance and re-amortizes it twice: once at your current interest rate over your remaining term (your old monthly payment), and once at the new interest rate over the new loan term (your new monthly payment). Monthly savings is the old payment minus the new payment. The break-even point is your closing costs divided by that monthly savings: the number of months before the refinance has paid for itself. Total interest on each side is payment times months minus the loan balance, and lifetime savings is what remains on the current loan minus the new loan's total payments plus closing costs. A break-even of zero means the new payment is not lower, so the refinance never pays back its costs. This comparison uses principal and interest only: property taxes and insurance usually do not change when you refinance. These are estimates for planning, not financial advice. Speak to a licensed mortgage professional before you refinance.
Refinancing means replacing your existing mortgage with a brand-new loan that pays off the old one. People refinance for four main reasons: to get a lower interest rate, to lower the monthly payment by stretching the term, to shorten the term and pay the loan off faster, or to do a cash-out refinance that borrows more than the current balance and hands you the difference in cash. A lower rate on paper is not enough on its own: closing costs, the length of the new term, and how long you plan to keep the loan decide whether refinancing actually saves you money.
Enter your current loan balance, interest rate, and the years remaining on it. Then enter the new rate and term you have been offered, plus your estimated closing costs from the lender's Loan Estimate. The calculator immediately shows your new monthly payment, how much it falls by, the break-even month when monthly savings have repaid the closing costs, and the lifetime savings after those costs are subtracted. It also compares the total interest left on your current loan with the total interest on the new loan, so a lower payment that secretly raises your lifetime cost cannot hide.
The break-even point is the single most important number in any refinancing decision. It is the month when your accumulated monthly savings finally cover what you paid upfront. The break-even formula is simple: break-even months = closing costs / monthly savings. For example, $6,000 in closing costs divided by $200 in monthly savings gives a 30-month break-even. Stay in the home past that month and the refinance makes money; sell or refinance again before it and the refinance loses money. As a rough guide, many advisers look for a break-even well inside your planned stay, with comfortable margin, before calling a refinance worthwhile.
Refinancing usually makes sense when you can cut your rate by roughly 0.5 to 1 percentage point or more, your credit score qualifies you for the quoted rate, you plan to stay past the break-even date, and the new term does not add more interest than the rate drop removes. It usually does not make sense when you plan to move or pay off the loan before break-even, when high closing costs eat most of the rate savings, when your credit profile has weakened since your original loan, or when you would trade a fixed rate for an adjustable one without a clear reason. A refinance that resets your clock from 22 years left to a fresh 30-year term is the most common way a lower rate ends up costing more. If your home has gained value, refinancing can also bring you below 80% loan-to-value and remove PMI, which adds to the monthly savings. A good refinance rate is usually at least 0.5 to 1 percentage point below your current rate, though the real test is the break-even month versus how long you will stay, not the rate alone.
A new 30-year loan lowers your payment partly by stretching it out, and that extra time can erase the benefit of a lower rate. Take a $320,000 balance at 6.75% with 22 years left: about $262,900 of interest still to come. Refinancing to 5.75% over a fresh 30 years drops the payment by more than $400 a month but adds 8 extra years of payments, and the total interest rises by roughly $51,000. Refinancing the same balance at 5.75% over 22 years instead costs about $217,900 in interest, around $45,000 less than staying put. The lesson: match the new term to your remaining time (or shorten it) if lifetime cost is the goal, and only extend the term when monthly cash flow is the priority.
Refinance closing costs typically run 2% to 6% of the loan amount and cover the origination fee, appraisal, title insurance, and recording fees. Ask every lender for a Loan Estimate so you can compare line-item fees, not just rates. You can often roll closing costs into the new loan balance instead of paying cash, but that raises the balance and the total interest, so the break-even math shown here (which treats costs as paid upfront) will look slightly more favorable than reality. A no-closing-cost refinance is never free: the lender recovers the costs through a slightly higher rate (often 0.125% to 0.375% more) or a larger balance. It can still be the right call if you plan to move or refinance again within a few years, because there is no sunk upfront cost to recover.
Divide your total closing costs by your monthly payment savings. If refinancing costs $6,000 and saves you $200 a month, the break-even is 30 months. You only come out ahead if you keep the loan longer than that; sell before month 30 and the refinance costs you money. Our calculator does this automatically from your current loan details and the new rate you enter.
Refinancing generally makes sense when you can lower your rate by at least 0.5 to 1 percentage point, you plan to stay in the home past the break-even point, your credit score qualifies you for the quoted rate, and the new term does not add more interest than the rate drop saves. If you might move within a couple of years, run the numbers carefully: closing costs are rarely recovered that fast. The calculator shows exactly how much you save each month and over the life of the loan, so you can weigh those savings against the closing costs.
Expect closing costs of about 2% to 6% of the loan amount. On a $300,000 refinance that is roughly $6,000 to $18,000, covering the origination fee (often 0.5% to 1% of the loan), appraisal ($300 to $600), title insurance, and recording fees. Get a Loan Estimate from at least three lenders: it is a standardized document that makes line-item fees easy to compare.
It causes a small, temporary dip. The lender's hard credit inquiry typically lowers your score by 5 to 10 points, and it usually recovers within a few months. If you shop multiple lenders within a 14 to 45 day window, credit scoring models generally count those mortgage inquiries as a single inquiry, so rate shopping does not multiply the damage.
Most conventional refinances need a score of at least 620, with the best rates reserved for scores above 740 (and even 760 for the lowest pricing). FHA streamline refinances can work with scores as low as 580. Because even a quarter-point rate difference moves your payment and break-even noticeably, spending a few months improving your score before applying can pay for itself many times over. If your credit is bad, an FHA streamline refinance may still be possible, but the rate you qualify for may produce too little monthly savings to clear the closing costs.
A 15-year loan usually carries a lower rate and dramatically less total interest, but the monthly payment runs 30% to 40% higher than a 30-year loan. Choose the 15-year term if you can comfortably afford the higher payment and want to minimize lifetime cost. Choose the 30-year term if monthly cash flow is the priority: you can always make extra principal payments to get much of the interest benefit without the obligation.
Yes. A refinance is a brand-new loan, so refinancing 22 years left into a new 30-year loan restarts the amortization clock and adds years of payments at the back end. That is why a lower rate can still raise your total interest. To avoid the reset, refinance into a term that matches your remaining time (a 20-year loan when you have 20 years left), or keep making your old, higher payment on the new loan as extra principal.
Rolling costs into the balance preserves your cash at closing, which helps if you are short on funds, but it increases the loan amount and the total interest you pay over the loan's life. The calculator treats closing costs as paid upfront, so if you finance them, your true break-even arrives a little later than shown. Compare both versions with your lender's figures before deciding.
They can be, especially if you plan to move or refinance again within a few years, since there is no upfront cost to recover. They are not actually free: the lender charges a slightly higher rate (typically 0.125% to 0.375% more) or adds the costs to your balance. If you keep the loan for its full term, a paid-upfront refinance usually costs less overall.
A cash-out refinance replaces your mortgage with a larger one and gives you the difference as a lump sum of cash, often used for renovations or paying off higher-interest debt. Most conventional lenders cap the new loan at 80% of your home's appraised value: on a $500,000 home with $310,000 owed, you could take up to $90,000 in cash. It raises your balance and may bump your rate, so compare it against a home equity loan before deciding.
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