Should you refinance your mortgage? Enter your current loan and a new rate, and this refinance calculator shows your new monthly payment, how long it takes to recover your closing costs, and how much you save (or lose) over the time you plan to keep the loan.
Your monthly payment would drop by
—
Net savings over time
Payments saved, minus closing costs, plus the difference in what you still owe. Above $0 means refinancing has paid off.
Current loan vs. new loan
| Current loan | New loan |
|---|
Estimates only. Compares principal and interest; property tax, insurance and PMI are assumed unchanged. Your actual rate and closing costs depend on your lender, credit profile and home value.
How to use this refinance calculator
- Current loan balance, rate and years remaining: all three are on your mortgage statement. The calculator shows your current principal and interest payment so you can check it matches.
- New interest rate and term: use a rate quote from a lender if you have one.
- Closing costs: enter a percentage of the loan or a dollar amount, and choose whether you pay them in cash or add them to the new loan.
- Cash out: any extra amount you want to borrow against your home equity.
- Years you’ll keep the loan: how long you expect to stay in the home or keep this mortgage. This is the most important number in a refinance decision.
The calculator compares principal and interest only. Property tax and homeowners insurance usually stay the same after a refinance, so they don’t change the result.
How the refinance break-even point is calculated
The simple way to find your break-even point is to divide closing costs by monthly savings. For example, refinancing a $300,000 balance from 7.25% (27 years left) to a new 30-year loan at 6.25% lowers the payment from $2,112.58 to $1,847.15, saving $265.43 a month. With 3% closing costs ($9,000), the simple break-even is $9,000 ÷ $265.43 = about 34 months.
That shortcut ignores something important: a new 30-year loan pays down principal more slowly than your current loan, which is already 3 years in. This calculator counts the difference in what you still owe, so it gives a more accurate break-even of 3 years and 1 month. If you keep the loan 10 years, you come out about $17,478 ahead.
The chart under the calculator shows your net savings month by month. Where the line crosses $0 is your break-even point. If it later bends down, the longer loan term is eating into the savings.
When does refinancing make sense?
An old rule of thumb says refinance when you can cut your rate by at least 1%. A better test is whether you’ll keep the loan longer than your break-even point. Using the same $300,000 loan:
- A 1% rate drop (7.25% to 6.25%) breaks even in about 3 years.
- A 0.5% rate drop (7.25% to 6.75%) saves $166.79 a month but takes about 7 years to break even. Over the full 30-year term you would pay about $25,009 more than keeping your current loan, because the term resets.
- Lower closing costs change the picture: at 2% the 1% rate drop breaks even in about 2 years; at 6% it takes about 6 years and 5 months.
If you might sell or move before the break-even point, refinancing will likely cost you money even if the monthly payment goes down.
Choosing a new loan term: 30, 25 or 15 years
Refinancing into a new 30-year loan gives the lowest payment, but it adds years of payments. Using the same $300,000 balance at 6.25% with 3% closing costs:
| New term | Monthly P&I | Change vs. today | Break-even | Net savings after 10 years | Lifetime savings |
|---|---|---|---|---|---|
| 30 years | $1,847.15 | −$265.43 | 3 yrs 1 mo | $17,478 | $10,502 |
| 25 years | $1,979.01 | −$133.57 | 3 yrs | $23,560 | $81,774 |
| 15 years | $2,572.27 | +$459.69 | 2 yrs 6 mo | $50,922 | $212,468 |
A shorter term raises the payment but builds equity much faster, so it can break even sooner and save far more over time. If the 15-year payment is too high, a 30-year loan with extra principal payments is a flexible middle ground. You can test extra payments in our mortgage calculator.
How much does it cost to refinance?
Refinance closing costs typically run 2% to 6% of the loan amount, or $6,000 to $18,000 on a $300,000 loan. Common fees include the lender’s origination fee, appraisal, title services, credit report and recording fees.
Adding closing costs to your loan (sometimes called a “no-cost” refinance) means no cash at closing, but you pay interest on those costs. In the example, rolling $9,000 into the loan raises the new payment to $1,902.57, pushes break-even to about 3 years and 11 months, and turns the lifetime result slightly negative. Ask lenders for a Loan Estimate and compare the total costs, not just the rate.
Cash-out refinance
A cash-out refinance replaces your mortgage with a larger loan and pays you the difference in cash. Conventional and FHA cash-out loans generally let you borrow up to 80% of your home’s value; VA loans can go higher. Taking $50,000 out in the example raises the payment to $2,155.01, so the calculator shows the true long-term cost of that cash.
If your current rate is lower than today’s rates, a home equity line of credit (HELOC) may be cheaper than a cash-out refinance, because you keep your existing mortgage rate.
Other reasons to refinance
- Remove mortgage insurance: if your home has gained value, refinancing a loan with PMI or FHA mortgage insurance into a conventional loan with at least 20% equity can remove it.
- Switch from an adjustable to a fixed rate: lock in a predictable payment before an ARM resets.
- Pay off the loan faster: move to a shorter term to save interest.
- Remove a borrower: for example after a divorce, when one person keeps the home.
Your credit score has a big effect on the rate you’ll be offered, so check your credit report for errors before you apply. If you’re planning a move instead, our home affordability calculator shows how much your next home could cost.
Frequently asked questions
How do I calculate my refinance break-even point?
Divide your total closing costs by your monthly savings. For example, $9,000 in costs divided by $265 a month in savings is about 34 months. A more accurate break-even also counts the difference in loan balances, because a new 30-year loan pays down principal more slowly; this calculator does that automatically.
Is it worth refinancing for 1% lower rate?
Often, if you’ll keep the loan past the break-even point. On a $300,000 balance, dropping from 7.25% to 6.25% saves about $265 a month and breaks even in about 3 years with 3% closing costs. A 0.5% drop on the same loan takes about 7 years to break even.
How much are closing costs on a refinance?
Refinance closing costs typically range from 2% to 6% of the loan amount, or about $6,000 to $18,000 on a $300,000 loan. They include origination, appraisal, title and recording fees.
Does refinancing restart my loan term?
Yes, a refinance is a new loan with a new term. Moving from a loan with 27 years left into a new 30-year loan adds 3 years of payments, which can increase total interest even when the rate is lower. Choosing a shorter term or making extra payments avoids this.
Can I refinance with closing costs added to the loan?
Yes. Many lenders let you add closing costs to the new loan balance so you pay nothing upfront. You will pay interest on those costs, which raises your monthly payment slightly and pushes your break-even point later.
This calculator provides estimates for educational purposes only and is not financial advice. Your actual rate and costs depend on your lender, credit profile and home value. Sources: Experian: How Much Does It Cost to Refinance a Mortgage?; Lower: How Much Can You Cash Out on a Refinance?