Refinance Calculator

The break-even point

Refinancing has upfront costs (origination, appraisal, title, recording — typically 2–5% of the loan). Until your monthly savings recoup that outlay, you're underwater. The break-even point tells you how many months until refinancing pays for itself.

Rule of thumb

Break-even less than 24 months and you plan to stay 5+ years → refinance. Break-even over 5 years and you might move soon → probably skip it.

Watch the term

Refinancing from "25 years left" into a new 30-year loan lowers your monthly payment, but you've added 5 years of payments. Total lifetime interest may actually increase even though the monthly drops. The "lifetime interest saved" row above accounts for this.

The formula

Two full amortization schedules are run — one for the current loan at its current rate and remaining term, one for the new loan at the new rate and term — and compared:

breakEvenMonths = closingCosts / (currentPayment − newPayment)

If closing costs are rolled into the new loan instead of paid up front, there's no cash outlay to recoup, so the break-even is immediate (month 0) — but you're financing the closing costs over the new loan's term, which is what "lifetime interest saved" already accounts for.

Worked example

Current loan: $300,000 remaining at 6.5% with 25 years left — payment $2,025.62/mo, remaining interest $307,686.45 if left alone.

New loan: 5% for a fresh 30-year term, $3,000 in closing costs paid out of pocket. New payment: $1,610.46/mo — a monthly savings of $415.16. Break-even: $3,000 ÷ $415.16 ≈ 7.2 months. Despite resetting the clock to a full 30 years, lifetime interest still drops by about $24,919 because the rate cut (6.5% → 5%) outweighs the 5 extra years of payments.

Frequently asked questions

Should I roll closing costs into the loan?

It removes the cash-out-of-pocket hit and the break-even math shows "immediate," but you're financing those costs at the new mortgage rate for up to 30 years — so it's rarely free. Rolling in makes more sense if you're cash-constrained now; paying cash makes more sense if you have it, since it costs less over the life of the loan.

How much do rates need to drop to be worth it?

There's no fixed threshold, but a common rule of thumb is looking for at least a 0.5–1 percentage point drop before the closing costs are likely worth it — and even then, run your actual numbers. A big loan balance can make a smaller rate drop worthwhile; a small balance may need a bigger drop to clear the closing-cost hurdle.

Does refinancing hurt my credit?

Applying triggers a hard credit inquiry, which typically causes a small, temporary dip. Rate-shopping across multiple lenders within a short window (usually 14–45 days depending on the scoring model) is generally counted as a single inquiry for credit-scoring purposes, so it's worth comparing several lenders in the same window rather than spreading applications out.

What if I plan to sell before the break-even month?

Then refinancing is a net loss — you'll have paid the closing costs without ever recouping them in monthly savings. Compare your break-even month to how long you actually expect to stay in the home, not just whether the monthly payment goes down.