How to use the refinance calculator
- Enter your current loan balance, its interest rate and the years left on your mortgage.
- Enter the new rate and term you’ve been offered.
- Add the closing costs and choose whether to pay them upfront or roll them into the new loan.
You’ll see the new monthly payment, the difference from your current one, your break-even date and how the total cost changes over the life of the loan. The chart tracks your net savings month by month.
How the break-even point is calculated
Each month, the calculator compares the interest you would pay on your current loan with the interest on the new one. You break even in the month when the interest you’ve saved adds up to more than your closing costs.
A quick estimate divides the closing costs by the monthly savings: in the example below, $5,000 ÷ $247.74 ≈ 20 months, close to the 22 months the calculator finds by counting interest. Counting interest is more accurate, especially when the new term differs from the time left on your loan.
Example: refinancing a $280,000 balance
| Loan | Monthly payment | Change per month | Break-even | Saved over the loan |
|---|---|---|---|---|
| Current: 7.25%, 27 years left | $1,971.74 | — | — | — |
| New: 30 years at 6.25% | $1,724.01 | −$247.74 | 22 months | $13,202 |
| New: 20 years at 6.25% | $2,046.60 | +$74.86 | 21 months | $142,661 |
| New: 15 years at 5.75% | $2,325.15 | +$353.41 | 14 months | $215,318 |
The new 30-year loan lowers the payment the most, but it adds three years of payments, which uses up most of the saving. A shorter term raises the payment yet saves far more over the life of the loan. Rolling the $5,000 into the new 30-year loan would make the payment $1,754.79 and push break-even to about 25 months.
When refinancing can make sense
- Rates have fallen enough that you’ll pass the break-even point well before you expect to sell or refinance again.
- You want a shorter term to own your home sooner and pay less interest.
- Your credit has improved, so you now qualify for a better rate.
- You want to move from an adjustable rate to a fixed rate. Our fixed vs. adjustable calculator compares the two.
A cash-out refinance, which borrows more than you owe, is a different decision: it turns home equity into new debt.
Costs to check before you refinance
- Closing costs: appraisal, title, origination and other fees, often 2% to 5% of the loan amount.
- Discount points: an upfront fee for a lower rate. Our discount points calculator shows if they pay off.
- A longer term: a lower payment can still cost more in total if it adds years.
- Prepayment penalties on your current loan, if it has any.
- The APR, which includes many fees, not just the rate. Our APR vs. APY guide explains it.
Frequently asked questions
How much lower should my rate be to refinance?
There’s no fixed rule. What matters is whether you’ll keep the loan past the break-even point. A small drop can pay off on a large balance with low costs, while a bigger drop may not if you plan to move soon.
What is the break-even point on a refinance?
It’s how long it takes for what you save to cover your closing costs. If you sell or refinance again before then, refinancing costs you money.
Should I roll closing costs into the loan?
It saves cash upfront, but you borrow more, pay interest on the costs and break even later.
Does refinancing restart my mortgage?
Yes. The new loan starts a new term. Choosing a term close to the years you have left, or shorter, avoids stretching out your debt.
Will refinancing hurt my credit score?
Applying usually means a hard inquiry, which can lower your score a little for a short time. Common scoring models count several mortgage inquiries within a short shopping period as one. Our guide to credit scores explains more.
Related calculators and guides
Estimates only, not a loan offer. Your actual rate, fees and savings depend on your lender and your credit.