How to use this refinance calculator
Enter your current loan's balance, interest rate, and how many years you have left. Then enter the new rate and term you're being offered, plus your estimated closing costs. The calculator immediately shows three things:
- Your new monthly payment and how much that's up or down vs. today.
- The break-even month — when monthly savings have covered closing costs.
- Lifetime savings (or extra cost), comparing total interest paid under each loan.
If you also enter how long you plan to keep the loan, the calculator surfaces a net-over-holding-period figure — the most honest "should I do this?" number, since most people refinance more than once before paying off the loan in full.
How refinance break-even is calculated
Refinancing has two cash-flow sides: closing costs you pay now, and monthly savings you collect going forward. The break-even is the month when the monthly savings have repaid the closing costs:
Break-even months = closing costs ÷ monthly payment savings
Example: closing costs of $6,000 and monthly savings of $200 gives a break-even of $6,000 ÷ $200 = 30 months. After month 30, every $200 of monthly savings is net money in your pocket. Before month 30, you haven't yet earned back the upfront cost.
Refinance break-even example
$300,000 mortgage at 7.00% APR with 30 years remaining, refinanced into a new 30-year loan at 6.00% with $6,000 in closing costs.
| Metric | Current loan | New (refinanced) |
|---|---|---|
| Monthly P&I | $1,995.91 | $1,798.65 |
| Total interest over the loan | $418,527 | $347,515 |
| Total paid | $718,527 | $647,515 + $6,000 closing = $653,515 |
Monthly savings: $197.26. Closing-cost break-even: ≈ 30 months. Lifetime savings if you keep the new loan to maturity: $65,012 (after subtracting closing costs).
$300,000 refinance: rate comparison
30-year fixed loan, principal & interest only, on a $300,000 balance.
| New rate | Monthly P&I | Total interest (30 yrs) |
|---|---|---|
| 5.5% | $1,703.37 | $313,212 |
| 6.0% | $1,798.65 | $347,515 |
| 6.5% | $1,896.20 | $382,633 |
| 7.0% | $1,995.91 | $418,527 |
Each one-percentage-point reduction on a $300K loan saves about $95–100/month and roughly $34,000–35,000 in lifetime interest.
Closing-cost break-even by monthly savings
How long it takes to recover closing costs at different combinations of monthly savings and closing-cost amounts.
| Monthly savings | $3,000 closing | $6,000 closing | $9,000 closing |
|---|---|---|---|
| $100 | 30 months | 60 months | 90 months |
| $200 | 15 months | 30 months | 45 months |
| $300 | 10 months | 20 months | 30 months |
| $400 | ~8 months | 15 months | ~23 months |
Monthly savings vs. lifetime interest
Two refinance scenarios can have very different "right answers" depending on whether you focus on monthly cash flow or total interest paid:
- Same term, lower rate (e.g. 30-yr → 30-yr at lower APR): reduces both monthly payment and total interest. Almost always a win if you stay long enough to clear closing-cost break-even.
- Shorter term at similar or lower rate (e.g. 30-yr → 15-yr): monthly payment goes up, but total interest can drop dramatically — sometimes by hundreds of thousands of dollars. The lifetime-difference number is the right metric here, not the monthly delta.
- Longer term to lower the payment (e.g. 22 yrs left → 30-yr): monthly cash-flow relief, but you can end up paying more total interest even at a lower rate. The calculator's lifetime-difference figure will surface this clearly.
When refinancing may make sense
- You can lower your rate by ~0.5–1.0 percentage points or more.
- You plan to stay in the home (and on the loan) past the break-even date.
- Your credit score and home value have improved enough to qualify for the new rate.
- You want to switch from an ARM to a fixed-rate, or shorten the term to save substantial total interest.
- You want to cancel PMI by recasting at a lower LTV after appreciation.
When refinancing may not make sense
- You plan to sell or pay off the loan before break-even.
- Closing costs eat most of the rate savings.
- Resetting to a longer term increases total interest, even at a lower rate.
- You'd lose a meaningful prepayment-penalty grace period or other product feature.
- Your credit profile has weakened since you took out the original loan.
Frequently asked questions
What's a typical refinance closing cost?
Most refinance closing costs run 2%–5% of the new loan amount. On a $300,000 refinance that's roughly $6,000–$15,000. Get a Loan Estimate from any lender — they're standardized by the CFPB and let you compare line-item fees across offers.
How much does a refinance lower my rate need to actually save money?
The old "1% rule" is a rough guide, not a hard threshold. With $6,000 in closing costs and a $300,000 balance, even a 0.5-point rate cut saves about $95/month and breaks even in roughly 5 years. The real test is your break-even month versus how long you'll stay — that's what the calculator above shows.
Does refinancing reset my mortgage clock?
Yes — a refinance is a brand-new loan. If you have 22 years left on a 30-year mortgage and refinance into a new 30-year loan, you're back to a 30-year amortization schedule. To avoid resetting the clock, refinance into a shorter-term loan (15- or 20-year) or commit to making extra principal payments equal to your old payment amount.
Frequently Asked Questions
How is the refinance break-even calculated?
Break-even months = closing costs ÷ monthly payment savings. If your new mortgage saves $200/month and you paid $6,000 in closing costs, you break even at month 30 — after that point, every monthly saving is net money in your pocket.
When does refinancing make sense?
Refinancing typically makes sense when (1) you can lower your rate by at least 0.5–1.0 percentage points, (2) you plan to keep the home long enough to recover closing costs, and (3) your credit profile qualifies for the new rate. The exact threshold depends on closing costs and how long you stay.
Can I save by refinancing into a shorter term?
Yes — refinancing from a 30-year to a 15-year (or 20-year) often saves substantial total interest, even if the monthly payment goes up. The lifetime-savings figure in the calculator captures this: a higher monthly payment can still produce big lifetime savings if the new term is much shorter or the rate is much lower.
Does the calculator include taxes, insurance, and PMI?
No — to keep the comparison clean, the calculator uses principal & interest only on both the current and new loan. Refinancing usually does not change property taxes or insurance. PMI may change depending on the new LTV, but the calculator does not model that automatically. Use the Mortgage Payment Calculator to see your full PITI for either loan separately.
Should I roll closing costs into the new loan?
Rolling closing costs into the principal preserves your cash but increases your loan balance and total interest. The calculator treats closing costs as paid upfront for the simplest break-even comparison. If you plan to finance them, increase your "current loan balance" by the closing-cost amount and zero out the closing-cost field.