When does refinancing make sense?

Refinancing typically makes sense when you can reduce your rate by 0.5-1% or more, plan to stay in the home past the break-even point, and closing costs are reasonable relative to monthly savings.

What is the break-even point?

The break-even point is when cumulative monthly savings equal closing costs paid. If break-even is 24 months and you plan to stay 5+ years, refinancing likely makes financial sense.

Should I roll closing costs into the new loan?

Rolling costs into the loan avoids upfront payment but increases the loan balance and total interest. Paying costs separately preserves more equity and reduces long-term interest.

What about cash-out refinancing?

Cash-out refinancing lets you borrow against home equity. This increases your loan balance and may raise your rate. Best used for high-value purposes like home improvements or debt consolidation.

How do I compare 15-year vs 30-year refinance?

A 15-year term has higher payments but lower rates and much less total interest. Compare the monthly payment difference against total interest savings to decide which fits your budget and goals.

What are typical refinance closing costs?

Closing costs range from 2-5% of loan amount, including application fees, appraisal, title insurance, and lender fees. Some lenders offer no-closing-cost options with slightly higher rates.

Can I refinance with low equity?

Traditional refinancing requires 20% equity, but FHA streamline and VA IRRRL programs may allow refinancing with less. However, less than 20% equity may require PMI.

How often can I refinance my mortgage?

There's no legal limit, but each refinance has costs. Most experts suggest waiting at least until you've passed your current break-even point before refinancing again.

Refinance Calculator

Compare current loan vs refinancing options

Instant results•No signup•Estimates only

Current Loan

Remaining Balance

Current Rate

Years Left

New Loan

New Rate

New Term

Closing Costs

Monthly Savings

+$319

Current Payment

$1,847

New Payment

$1,529

Break-Even Point

16 months

Lifetime Savings

$3,856

Visualization

Loan Balance Over Time

Remaining Balance
Principal Paid

Original Loan

$255,000

Total Interest

$507,983

Total Paid

$431,640

Results are estimates and may vary based on lender terms and fees.

Results are estimates for informational purposes only and do not constitute financial advice. Actual results may vary based on lender terms, fees, and other factors.

How calculations work Full disclaimer

Refinance Calculator Formula

Savings = M_{old} - M_{new}

Monthly savings equals your current payment minus your new payment. The break-even point divides total closing costs by monthly savings. This determines how long you must keep the new loan for refinancing to be worthwhile.

How the Refinance Calculator Works

1Enter your current loan balance and interest rate
2Input your remaining loan term in months or years
3Enter the new interest rate and loan term you're considering
4Include estimated closing costs for the refinance
5View monthly savings, break-even point, and lifetime savings

Refinance Calculator Key Terms

Break-Even Point: The number of months until your total monthly savings equal the closing costs paid to refinance.
Closing Costs: Fees required to complete the refinance, typically 2-5% of loan amount, including origination, appraisal, and title fees.
Rate-and-Term Refinance: Refinancing only to change the interest rate or loan term without taking cash out.
Cash-Out Refinance: Refinancing for more than you owe and taking the difference as cash, often for home improvements or debt consolidation.

Refinance Calculator Tips

•Only refinance if you'll stay past the break-even point
•Rate drops of 0.5-1% or more typically make refinancing worthwhile
•Rolling closing costs into the loan increases your balance and total interest
•Refinancing to a shorter term increases payments but saves significant interest
•Compare multiple lenders—rates and fees vary substantially

When to Use This Refinance Calculator

✓Interest rates have dropped since you got your original loan
✓Your credit score has improved significantly
✓You want to switch from adjustable to fixed rate
✓You need to remove a co-borrower from the loan
✓You want to change your loan term (extend or shorten)

Refinance Calculator Examples

Rate Drop Refinance

Balance:$250,000Current:7.5%New:6%Costs:$5,000

Result:$238/month savings

Refinancing from 7.5% to 6% saves $238 monthly. Break-even in 21 months; worth it if staying 2+ years.

Cash-Out Refinance

Balance:$200,000Current:6.5%New:6.25%Costs:$8,000

Result:$85/month savings

Small rate reduction with cash-out. Monthly savings lower, break-even in 94 months.

Term Reduction

Balance:$300,000Current:7%/30yrNew:6%/15yrCosts:$6,000

Result:Higher payment, $180K interest savings

Shorter term increases payment but saves $180,000 in total interest over the life of the loan.

Understanding Refinance in Depth

Refinancing can save thousands over the life of your mortgage, but it's not always the right move. This calculator helps you make an informed decision by calculating the true break-even point and lifetime impact.

The Break-Even Analysis

This is the critical calculation. If refinancing costs $5,000 and saves $200/month, break-even is 25 months. If you plan to sell in 2 years, you won't recoup costs. If you'll stay 5+ years, refinancing saves substantial money.

Rate vs. Term Considerations

Lowering your rate while keeping the same term is straightforward—lower payments and less interest. But many borrowers refinance from their current term into a new 30-year loan, restarting the clock. This lowers payments but often increases total interest paid despite the rate reduction.

The Term Reduction Strategy

Refinancing from 30 years to 15 years often makes sense when rates drop. The rate is typically 0.25-0.5% lower for 15-year loans, payments are higher but total interest savings can exceed $100,000. Ensure the higher payment fits your budget comfortably.

When Refinancing Doesn't Make Sense

Avoid refinancing if you're near the end of your loan (most interest is already paid), if break-even exceeds your planned stay, if you'd be tempted to cash out equity for discretionary spending, or if your credit has declined significantly.

Refinance Calculator FAQs

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Marcus Chen

Financial Analysis Specialist

Marcus has over 12 years of experience in quantitative finance and personal financial planning. He specializes in loan analysis, investment modeling, and consumer debt strategies. His methodologies incorporate industry-standard financial mathematics used by major lending institutions.

Content reviewed: January 2026Next review scheduled: 2027

Editorial Standards: All calculations use industry-standard financial formulas. Content is reviewed for mathematical accuracy and updated to reflect current market conditions. This tool provides estimates for informational purposes and does not constitute financial advice.