Refinance Calculator
Compare your current mortgage to a refinance offer and find the break-even point — how long until savings exceed closing costs.
How to use this refinance calculator
- 1Enter your current loan balance, interest rate, and years remaining.
- 2Enter the new rate and term from your refinance quote.
- 3Enter total closing costs — typically 2–5% of loan amount, or $4,000–$10,000 on a $200,000 loan.
- 4If break-even is shorter than you plan to stay in the home, refinancing makes financial sense.
- 5Check the lifetime cost difference — a lower monthly payment does not always mean lower lifetime cost if the term extends significantly.
How it's calculated
Break-even = closing costs ÷ monthly payment savings. Lifetime savings = old total payments − (new total payments + closing costs).
About the Refinance Calculator
Refinancing a mortgage is one of the largest financial decisions homeowners face, and the timing and terms can mean the difference of tens of thousands of dollars over the loan's life. The core analysis is straightforward — monthly savings versus upfront costs — but several nuances deserve careful consideration before signing.
The break-even analysis is the essential starting point. If refinancing from 7.25% to 6.0% on a $280,000 balance saves $215/month and costs $5,000 in closing costs, break-even is 5,000 ÷ 215 = 23.3 months. If you plan to stay in the home for 5+ years, the refinance saves significant money. If you plan to sell in 18 months, the refinance loses money even with a substantial rate reduction.
The total-cost analysis is more comprehensive than break-even and should also be calculated. Lower monthly payments can mask higher lifetime costs when the loan term extends. Refinancing from a 27-year remaining term into a new 30-year term at a lower rate might lower the monthly payment significantly but extend total payments by 3 years — resulting in more total interest paid despite the lower rate. This is why we show lifetime cost difference in the calculator output.
For homeowners who plan to stay in their homes long-term, the highest-return refinance strategy is often to refinance into a 15-year loan when rates are favorable. The rate on a 15-year is typically 0.5–0.75% lower than a 30-year, and the shorter term dramatically reduces total interest — often by $100,000 or more on a large loan. The monthly payment is higher, but the accelerated equity building and total interest savings make it financially superior for those who can afford it.
Frequently asked questions
When does it make sense to refinance?
The traditional rule of thumb is to refinance when you can lower your rate by at least 1%, but the better analysis is the break-even calculation. If your break-even is 18 months and you plan to stay in the home for 5+ years, refinancing is financially logical at almost any rate reduction. If your break-even is 48 months and you plan to sell in 3 years, refinancing loses money even with a significant rate reduction. Other situations where refinancing makes sense: switching from an adjustable-rate mortgage to a fixed rate to reduce risk, removing PMI, or shortening the loan term to build equity faster.
What closing costs should I expect when refinancing?
Refinance closing costs typically run 2–5% of the loan balance. Common costs include: origination or application fee ($500–$1,500), appraisal fee ($300–$700), title search and title insurance ($500–$1,000), attorney fees where required ($500–$1,500), recording fees ($25–$250), credit report fee ($30–$50), and prepaid items (first mortgage payment, homeowner's insurance, property tax escrow). Some lenders offer 'no-closing-cost' refinances, where fees are rolled into the loan balance or offset by a slightly higher rate. These can be beneficial if you plan to sell or refinance again within a few years.
Does refinancing restart my 30-year loan clock?
Refinancing into a new 30-year mortgage does restart the amortization clock, which has significant implications. If you are 7 years into a 30-year loan and refinance into a new 30-year loan, you have extended your total mortgage from 30 to 37 years. Even with a lower rate, the lifetime interest cost may increase because you are paying interest for more total months. To avoid this: consider refinancing into a 20-year or 15-year term instead. The payment will be higher than a 30-year but lower than your current payment in many rate scenarios, while dramatically reducing total interest paid and preserving your payoff timeline.
How does a cash-out refinance work?
A cash-out refinance replaces your current mortgage with a larger loan and gives you the difference in cash. If you owe $200,000 on a home worth $400,000 and do a cash-out refinance to $280,000, you receive $80,000 in cash. This cash is often used for home improvements, debt consolidation, or major expenses. The trade-offs: you pay a higher rate than a standard rate-and-term refinance (typically 0.25–0.5% higher), you reduce your home equity, and you restart your loan term. Cash-out refinances make most financial sense when the cash is used for home improvements that add value, since the interest may be tax-deductible for that use.
How many times can I refinance?
There is no legal limit on refinancing frequency. However, practical limits exist: each refinance has closing costs that must be recouped, and lenders typically require a seasoning period of 6–12 months from your last refinance before approving a new one. Multiple refinances only make sense if rates decline significantly or your financial situation changes materially. Some homeowners refinance 3–5 times over the life of their loan as rates fluctuate, each time locking in lower rates. The key discipline is always calculating break-even before proceeding and ensuring you will stay in the home long enough to recoup costs.