Refinance Calculator

When Does Refinancing Make Sense?

Refinancing replaces your current mortgage with a new one, ideally at a lower interest rate. The key question is whether the long-term savings outweigh the upfront closing costs — typically 2–5% of the loan amount. The break-even point is how many months it takes for your monthly savings to recoup those costs. If you plan to stay in the home longer than the break-even period, refinancing is generally worthwhile.

Rate-and-term refinancing reduces your rate, monthly payment, or loan term. Cash-out refinancing lets you borrow against your equity — useful for home improvements or debt consolidation, but it increases your loan balance and resets your payoff timeline.

How to Use This Calculator

Enter your current loan balance, remaining term, and interest rate in the "Current Loan" section. Then enter the new rate and term you've been quoted in the "New Loan" section. Add estimated closing costs to see your exact break-even month and total lifetime savings.

Frequently Asked Questions

• How much does refinancing save per month?
  It depends on the rate difference and loan balance. Dropping from 7.5% to 6.5% on a $300,000 loan saves about $185/month on P&I. Use the calculator above to compute your exact savings based on your specific loan.
• What are typical refinance closing costs?
  Closing costs typically run 2–5% of the loan amount — commonly $3,000–$8,000 on a $250,000 loan. Some lenders offer no-closing-cost refinances that roll the costs into the rate or loan balance. This calculator lets you input your exact estimated costs.
• Should I refinance to a 15-year mortgage?
  A 15-year refinance increases your monthly payment but cuts your total interest roughly in half and builds equity much faster. It makes sense if you can afford the higher payment and want to be mortgage-free sooner. Use the Compare tab to run both scenarios side by side.

Should You Refinance? Find Your Break-Even Point

Refinancing replaces your current mortgage with a new one, ideally at a lower rate or shorter term. The catch is that it isn't free — closing costs typically run 2–5% of the loan balance. The key question isn't just "is my new rate lower," but "how long until the monthly savings repay those costs." That moment is your break-even point, and it's the single most important number in a refinance decision. This calculator computes it from your current loan, your new rate, and your closing costs.

Worked Example

Suppose you owe $300,000 at 7.5% and can refinance to 6.25%, with $6,000 in closing costs. The lower rate trims roughly $250 from your monthly payment. Dividing $6,000 by $250 gives a break-even of about 24 months. If you plan to stay in the home longer than two years, the refinance pays off; if you might move sooner, you'd lose money on the transaction. The calculator also shows lifetime interest savings, which can run into the tens of thousands over a full 30-year term.

Beyond the Rate

Rate isn't the only reason to refinance. Borrowers refinance to shorten the term (trading a higher payment for far less total interest), to switch from an adjustable to a fixed rate for payment stability, to drop PMI once they've built 20% equity, or to tap equity through a cash-out refinance. Each goal changes the math. Note one subtle cost: restarting a 30-year clock on a loan you're 8 years into can increase total interest even at a lower rate, because you're stretching repayment back out. Compare total interest, not just the monthly payment, before deciding.

• How much lower does the rate need to be to refinance?
  There's no fixed threshold — what matters is the break-even point. Even a 0.5% drop can be worth it on a large balance if you'll stay long enough, while a bigger drop may not pay off if you're about to move.
• Does refinancing reset my loan term?
  Usually yes — a new 30-year refinance starts the clock over. You can choose a shorter term (such as 15 or 20 years) to avoid stretching out repayment and stacking up extra interest.
• What is a cash-out refinance?
  It replaces your mortgage with a larger one and gives you the difference in cash, drawn from your equity. It can fund renovations or consolidate debt, but it raises your balance and monthly payment.