Mortgage Refinance Calculator
A mortgage refinance is worth it only if you stay in the home long enough to recoup the closing costs through monthly savings — this is called the break-even point. Enter your new loan details in the calculator above to see the payment, then subtract it from your current payment to find your monthly savings. Divide your total closing costs by that monthly savings to get your break-even in months. The non-obvious trap: even if you lower your rate, resetting to a new 30-year term can cost you more in total interest than staying on your existing loan — always compare remaining-term options like a 20-year or 15-year refinance.
How it's calculated
Refinancing replaces your existing mortgage with a new one, typically at a lower interest rate or different term. Your new monthly payment is determined by the new loan amount (current balance + any rolled-in costs), the new interest rate, and the new term. Monthly savings equal your old P&I minus your new P&I.
Closing costs typically run 2–5% of the loan amount, according to the CFPB. These include origination fees, appraisal, title insurance, and prepaid interest. Break-even is calculated as: total closing costs ÷ monthly savings = months to break even. If you plan to sell or refinance again before hitting that month, the refinance costs you money net. Some lenders offer no-closing-cost refinances, but the costs are rolled into the rate or loan balance — there is no free lunch, just a different trade-off.
A worked example
You have a $280,000 balance at 7.25% with 22 years left. Your current P&I is $2,124. A lender offers a 30-year refinance at 5.75% with $7,000 in closing costs. Your new P&I would be $1,634 per month, saving $490 monthly. Break-even: $7,000 ÷ $490 = 14.3 months. If you plan to stay 5+ years, the refinance makes sense on monthly cash flow. But on the original 22-year remaining term, you would pay $145,608 more in total interest on the new 30-year loan versus finishing the old one — so a 20-year refinance at 5.75% (P&I: $1,948, break-even: 21 months) is worth comparing.
Common mistakes to avoid
- Resetting to a 30-year term without checking total interest. A 30-year refinance of a loan you have already paid for 8 years extends your payoff by 8 years and can add tens of thousands in interest even at a lower rate.
- Ignoring closing costs when calculating savings. A half-point rate drop saves real money monthly, but $8,000 in closing costs means it takes years to come out ahead.
- Refinancing right before a planned move. If your break-even is 36 months and you move in 24, you paid closing costs for nothing.
- Not shopping at least three lenders. The CFPB recommends comparing Loan Estimates from multiple lenders because rates and fees vary significantly for the same borrower profile.
- Cash-out refinancing for depreciating purchases. Tapping equity to buy cars or pay vacations converts unsecured spending into 30 years of mortgage interest.
Frequently asked questions
When does it make sense to refinance a mortgage?
Refinancing makes sense when your monthly savings from a lower rate exceed closing costs before you plan to move or refinance again. A common rule of thumb is that a rate drop of 1% or more is worth investigating, but the actual math depends on your break-even period and how long you plan to stay.
How much do refinance closing costs typically run?
Refinance closing costs typically run 2–5% of the loan amount, according to the CFPB. On a $300,000 loan, that is $6,000–$15,000. Costs include origination fees, appraisal, title search, and prepaid interest. Always get a Loan Estimate to see itemized costs before committing.
What is a no-closing-cost refinance?
A no-closing-cost refinance rolls closing costs into your loan balance or offsets them with a higher interest rate (a lender credit). You pay nothing upfront, but you pay more over time through a larger balance or higher rate. It works best if you plan to refinance again soon or are short on cash.
Does refinancing reset my mortgage clock?
Yes, if you choose a new 30-year term. Restarting the clock means more early payments go to interest, and your payoff date moves further out. Consider a shorter term like 20 or 15 years to avoid extending your debt while still lowering your rate. See our amortization schedule to compare total interest by term.
How do I calculate my refinance break-even point?
Divide your total closing costs by your monthly payment savings. For example, $7,000 in closing costs and $350 monthly savings yields a 20-month break-even. If you stay in the home at least that long, the refinance pays off. If you move sooner, you come out behind.