Refinance Calculator
Does refinancing my mortgage actually save me money?
A lower rate is only half the story. Enter your current loan and the new offer to find your break-even month and true lifetime savings after closing costs. Lenders advertise the new monthly payment, but the number that matters is the break-even point: the month your accumulated monthly savings first cover the closing costs. Pay $6,000 to save $200 a month and you break even in month 30.
A lower rate is only half the story. Enter your current loan and the new offer to find your break-even month and true lifetime savings after closing costs.
Last updated: October 2026
Your current loan
The new offer
Comparison covers principal and interest only. Taxes, insurance, and escrow are assumed unchanged. Closing costs are treated as paid out of pocket.
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How to tell if refinancing pays off
Lenders advertise the new monthly payment, but the number that matters is the break-even point: the month your accumulated monthly savings first cover the closing costs. The math is simple:
Pay $6,000 to save $200 a month and you break even in month 30. Sell, move, or refinance again before then and the refinance cost you money. Everything after the break-even month is pure savings, so your expected time in the home is the other half of the decision, a refinance with a 3-year break-even is excellent if you will stay 10 years and terrible if you will move in 2.
The second trap is the term reset. Refinancing a loan with 22 years left into a fresh 30-year loan almost always lowers the payment, but you are signing up for 8 extra years of interest. This calculator compares total remaining cost of both paths, so a tempting payment drop cannot hide an expensive term extension.
When refinancing makes sense
The classic rule of thumb is a rate improvement of at least 0.75 to 1 percentage point, but break-even is the real test: if you plan to stay in the home well beyond the break-even month, refinancing usually wins. Other good reasons include dropping PMI (if your home appreciated past 20% equity), switching from an adjustable rate to a fixed rate, or shortening the term to build equity faster.
Falling rates are not the only trigger. A big jump in your credit score since you bought, or a rise in home value that improves your loan-to-value ratio, can unlock better pricing even if market rates have not moved. And refinancing from a 30-year to a 15-year loan is one of the fastest ways to build equity, the payment rises, but a much larger share goes to principal from day one.
Rate-and-term vs. cash-out refinancing
A rate-and-term refinance replaces your loan with a new one at a better rate or term without changing the balance, this is the classic money-saving refinance. A cash-out refinance replaces your loan with a larger one and hands you the difference in cash, which is effectively borrowing against your equity.
Cash-out refinancing can make sense for value-adding home improvements, but it resets your balance higher and usually carries a slightly higher rate than a rate-and-term refinance. Using home equity to pay off credit cards is risky twice over: it converts unsecured debt into debt secured by your home, and many borrowers run the cards back up afterward. Treat cash-out as a tool for investments, not consumption.
Tips to avoid a bad refinance
Get a Loan Estimate from at least three lenders. Closing costs vary widely, and the break-even math is only as good as the cost figure you put in. Lender credits (a slightly higher rate in exchange for lower closing costs) can make sense if your break-even horizon is short.
Consider a shorter term instead of just a lower rate. Refinancing from a 30-year loan with 24 years left into a new 24- or 20-year loan keeps your payoff date on track while capturing the lower rate, the best of both worlds.
Do not roll costs in blindly. Rolling closing costs into the new loan balance is convenient, but you then pay interest on those costs for decades. If you have the cash, paying them upfront shortens the break-even point.
Watch the appraisal. Most refinances require one, and a low appraisal can kill the deal or force PMI back onto the loan. If your area's values are uncertain, ask the lender about appraisal waiver options first.
Worked example: refinancing $300,000 from 7.5% to 6.25%
Suppose you owe $300,000 with 25 years left at 7.5%. The current payment is $2,216.97 a month. A refinance offer at 6.25% over a new 25-year term drops the payment to $1,979.01, saving $237.97 a month. If closing costs are $6,000, the break-even point is $6,000 divided by $237.97, which is 25.2 months, about 26 months.
That single number decides the deal: if you are confident you will keep the home (and the loan) past month 26, the refinance pays for itself and then saves you $237.97 every month after. If you might sell or refinance again before then, the closing costs eat the savings and you lose money.
Break-even analysis: the only math that matters
Ignore the advertised rate for a moment and divide: total closing costs divided by monthly savings equals break-even months. In the example above, $6,000 / $237.97 = 25.2 months. Everything before month 26 is recovering your costs; everything after is profit.
Two traps to check. First, term resets: refinancing 25 years remaining into a new 30-year loan lowers the payment partly by stretching the debt, which can raise total interest even at a lower rate. Match the remaining term (or shorter) for an honest comparison. Second, rolling costs into the loan: adding the $6,000 to the balance means borrowing $306,000, which at 6.25% costs $2,018.59 a month. You still save $198.38 a month with nothing out of pocket, but you now pay interest on the closing costs themselves for 25 years.
Refinance FAQs
What is a refinance break-even point?
The month when cumulative monthly savings first exceed closing costs. $6,000 in costs ÷ $200/month savings = a 30-month break-even. Sell or move before then and the refinance loses money; everything after is pure savings.
How much does it cost to refinance?
Typically 2% to 5% of the loan amount, covering origination fees, appraisal, title insurance, and prepaid items. On a $320,000 loan that is roughly $6,400 to $16,000. Get a Loan Estimate from each lender for the exact figure, costs vary widely.
Is refinancing to a longer term a bad idea?
Not always, but restarting a 30-year clock can raise total interest even at a lower rate. Compare total remaining cost, not just the monthly payment. A good compromise: refinance to a term matching your remaining years (e.g., a 20-year loan when you have 20 years left).
When is refinancing worth it?
A rate drop of 0.75-1 point is the usual rule of thumb, but the break-even test decides: stay well past it and refinancing generally pays off. Other triggers include dropping PMI after appreciation, switching from an ARM to a fixed rate, or a much-improved credit score.
What is the difference between a rate-and-term and a cash-out refinance?
A rate-and-term refinance swaps your loan for a better rate or term with the same balance, the classic money-saver. A cash-out refinance replaces it with a larger loan and gives you the difference in cash, borrowing against your equity at a usually higher rate.
Will refinancing hurt my credit score?
Expect a small, temporary dip: the hard inquiry and a new account each cost a few points, and the average age of your accounts drops. Scores typically recover within a few months. Rate-shopping multiple lenders within a 14-45 day window counts as a single inquiry for scoring purposes.
Does refinancing restart my loan term?
Usually, yes, and it matters. Refinancing a loan with 25 years left into a new 30-year loan lowers your payment partly by giving you five extra years of payments, which can increase total interest even though the rate fell. Ask for the new loan to match your remaining term, or go shorter, so you are comparing rates honestly instead of comparing a 25-year payoff to a 30-year one.
What is a no-closing-cost refinance?
The lender covers the closing costs in exchange for a slightly higher rate, or the costs are rolled into the loan balance. You pay nothing out of pocket, but you pay for it over time: a higher rate trims your monthly savings, and rolled-in costs accrue interest for the life of the loan. It makes sense if you will sell or refinance again soon, since there is no break-even period to outlast.
How soon after buying can I refinance?
There is no legal waiting period for most conventional loans, but refinancing in the first year or two rarely pays because you have built almost no equity and rates seldom move enough that fast. Most borrowers refinance after rates drop at least 0.75 to 1 percentage point below their current rate, or when improved credit unlocks a much better offer.
Should I roll closing costs into the new loan?
It preserves cash and keeps the monthly savings positive from day one: in our $300,000 example, rolling $6,000 of costs into a 6.25% loan still saves $198.38 a month with nothing due at closing. The catch is that you pay interest on those costs for decades. If you have the cash and plan to stay long term, paying costs upfront usually wins; if cash is tight, rolling them in is reasonable.
How much can I save by refinancing?
Savings equal the difference between what your current loan would still cost and what the new loan costs including closing costs. A lower rate on a large balance saves the most. This calculator reports lifetime savings directly, so you can see whether the deal is worth the paperwork.