How the Refinance Calculator Works
Refinancing replaces your existing mortgage with a new loan, ideally at a lower interest rate. Our calculator compares your current monthly payment to your potential new payment, factoring in closing costs to reveal your true savings — not just the headline rate a lender advertises.
You enter your current balance, current rate, and remaining term, then the details of the new loan you're considering. In seconds you see your new payment, your monthly savings, and the single most important number in any refinance decision: your break-even point.
Understanding Your Break-Even Point
The break-even point is the most important number when deciding whether to refinance. It tells you how many months it will take for your monthly savings to recover the closing costs. If you plan to stay in your home longer than the break-even period, refinancing typically makes financial sense.
Example: if refinancing saves you $200/month but costs $4,000 in closing fees, your break-even point is 20 months ($4,000 ÷ $200). Stay past that point and every month is pure savings. Sell or move before it, and you actually lose money on the deal.
The Hidden Trap: Resetting Your Loan Term
Here's what many homeowners miss. Refinancing a loan with 25 years left into a fresh 30-year loan lowers your monthly payment — but adds 5 years of interest. You might save $150/month yet pay tens of thousands more over the life of the loan. That's why our calculator also shows the lifetime interest difference, so you see the full picture, not just the monthly number.
When Should You Refinance?
- When interest rates have dropped at least 0.5%–1% below your current rate.
- When you plan to stay in your home past the break-even point.
- When you want to switch from an adjustable-rate to a fixed-rate mortgage.
- When your credit score has significantly improved since your original loan.
Cash-Out Refinance vs. Rate-and-Term
A rate-and-term refinance simply swaps your loan for a better rate. A cash-out refinance lets you borrow against your home's equity, taking the difference in cash — useful for renovations or debt consolidation, but it increases your loan balance. Understand which one you actually need before signing.
Frequently Asked Questions
Is it worth it to refinance my mortgage?
Refinancing is generally worth it if your monthly savings outweigh the closing costs within a reasonable time frame. Use the break-even point above as your guide.
What is a break-even point in refinancing?
It's the number of months it takes for your monthly savings to cover the closing costs. After this point, you start saving money each month.
Does refinancing hurt my credit score?
Refinancing involves a hard credit inquiry, which may cause a small, temporary dip in your score. This typically recovers within a few months.
How much does it cost to refinance?
Closing costs typically run 2%–5% of the loan amount, covering appraisal, title, and lender fees. On a $250,000 loan, expect roughly $5,000–$12,500.