Refinance Calculator
Is refinancing worth it? Compare your current loan to a new one — break-even months, monthly savings, and lifetime interest.
Current loan
New loan
- Total interest, current loan$410,108.34
- Total interest, new loan$377,632.50
- Lifetime interest difference$32,475.84
You'd recoup the $6,000 in closing costs after about 1 yr 8 mo. Refinancing usually makes sense if you'll keep the home well past that point. Note: resetting to a new 30-year term restarts the clock, which can increase total interest even when the monthly payment drops.
How the math works
A refinance decision comes down to three numbers: your monthly savings, your break-even point, and your lifetime interest. Monthly savings is simply your current payment minus the new payment — both computed with the standard amortizing-loan formula (monthly rate = annual rate ÷ 12, payment sized to zero the balance over the term). The break-even point is closing costs divided by monthly savings: how many months of savings it takes to earn back what the refinance cost you.
The number most people skip is lifetime interest. If you refinance a loan with 25 years left into a brand-new 30-year loan, the clock restarts — you go back to the phase where payments are mostly interest. A lower rate with five extra years of payments can easily cost more in total than the higher-rate loan you had. That's why this calculator shows total interest for both loans, not just the monthly payment.
Why each input matters: your current balance, rate, and remaining term define the baseline you're comparing against; the new rate and term define the alternative (a shorter new term often beats a lower rate on a longer term); and closing costs are the hurdle — typically 2–5% of the loan — that your savings must clear before the refinance actually pays.
Worked example
Say you owe $320,000 at 7.25% with 25 years (300 payments) remaining: your payment is $2,312.98/month. You refinance into a new 30-year loan at 6.25%: the payment drops to $1,970.30, saving $342.69/month. With $7,200 in closing costs, you break even in about 21 months — after that, the savings are real money.
Here's the catch the payment alone hides: the new 30-year loan charges about $389,306 in total interest versus $373,895 remaining on your current loan — $15,412 more, because you restarted the clock. If you'll stay put for decades, ask the lender to quote a 25-year term at 6.25% instead: the payment stays low and the lifetime math flips in your favor.
What to watch for
- Compare lifetime interest, not just the payment. A refinance that "saves" $343/month but adds $15,000 in total interest is a cash-flow move, not a savings move. Know which one you need.
- Match the new term to your remaining years. Owe 25 years? Get quotes for 25- and 20-year loans, not just 30. Lenders default to 30 because the payment looks best — the term is negotiable.
- "No closing cost" isn't free. Lender credits cover your costs in exchange for a higher rate. Do the break-even math on the rate difference — over a long stay, paying costs upfront usually wins.
- Don't refinance right before selling. If you might move within two to three years, you may never reach break-even. The calculator's break-even month is your minimum stay.
- Protect your rate lock. Locks run 30–60 days and extensions cost money. Have your documents ready before you apply so underwriting doesn't eat your lock — talk to a licensed professional about timing.
Frequently asked questions
What is the break-even point on a refinance?
It's how long it takes for your monthly savings to cover the closing costs: closing costs divided by monthly savings. If closing costs are $6,000 and you save $200/month, you break even in 30 months. Refinancing usually makes sense if you'll keep the home well past that point.
Is a 1% rate drop worth refinancing?
The old '1% rule' is a rough starting point, but the real answer depends on your loan size, closing costs, and how long you'll stay. Run the numbers — on a large balance, even a 0.5% drop can pay off quickly.
Does refinancing restart my loan term?
If you refinance into a new 30-year loan, yes — the clock restarts, which can mean paying more total interest even with a lower rate. Compare lifetime interest, not just the monthly payment.
Should I roll closing costs into the loan?
Rolling costs in means no cash out of pocket, but you pay interest on those costs for the life of the loan. Paying them upfront usually wins if you have the cash and plan to stay a while.
What are typical refinance closing costs?
Usually 2–5% of the loan amount: lender origination fees, appraisal, title insurance, and recording fees. On a $320,000 loan that's roughly $6,400–$16,000. Lender credits can reduce the cash needed but typically come with a slightly higher rate.
How long does refinancing take?
Typically 30–45 days from application to closing: appraisal, underwriting, and disclosures each take their turn. Rate locks usually run 30–60 days, so ask what happens (and what it costs) if closing slips past the lock.
Can I refinance with little equity?
Conventional refinances generally want at least 20% equity to avoid PMI; with less, you'll pay PMI on the new loan too. FHA streamline and VA IRRRL programs let eligible borrowers refinance with less paperwork and no new appraisal.
Does refinancing hurt my credit score?
Expect a small, temporary dip: the hard inquiry and the new account. Multiple mortgage inquiries within a 14–45 day window (depending on the scoring model) count as a single inquiry for rate shopping, so keep your applications clustered.