How to Use This Calculator
1
Enter Current Loan
Input your current loan balance, monthly payment, and interest rate for accurate comparison.
2
Set New Loan Terms
Use the rate preset chips or type your quoted rate, choose a term, and enter estimated closing costs.
3
Find Your Break-Even
See exactly when savings offset closing costs, and whether refinancing makes sense for your stay duration.
Key Terms
- Break-Even Point
- The month when cumulative savings from lower payments equal the cost of refinancing. Stay beyond this point to benefit.
- Closing Costs
- Fees for the new loan (typically 2–5% of loan amount) including appraisal, title, origination, and recording fees.
- Rate Reduction
- The difference between your current and new interest rates. Generally, a 0.5–1% reduction is needed to justify refinancing costs.
- No-Cost Refinance
- Refinancing with no upfront fees — the lender rolls costs into a slightly higher rate. You break even instantly but pay more over time.
- Term Extension
- Resetting to a new 30-year term when years remain on your current loan. Lowers payment but increases total interest paid significantly.
Real-World Examples
Example 1
Strong Rate Drop Refinance
Current: $300,000 at 7.5%, New: 6.0%, 30yr, Closing costs: $6,000, Stay: 5 years
Monthly savings = $305 · Break-even = 20 months · Net at 5yr: $12,300 ✅ Worth it
Example 2
Marginal Rate Drop
Current: $250,000 at 6.5%, New: 6.0%, 30yr, Closing costs: $5,000, Stay: 4 years
Monthly savings = $85 · Break-even = 59 months · Net at 4yr: −$908 ❌ Not worth it
When Does Refinancing Make Sense?
The Break-Even Decision
Refinancing only saves money if you stay in the home past the break-even point. If closing costs are $6,000 and you save $300/month, you break even in 20 months. Plan to move sooner? Refinancing costs you money overall.
Beyond the Monthly Payment
A lower payment is not always a win. Refinancing a 20-year remaining loan into a new 30-year term lowers monthly payments but adds 10 years of interest. Use the Full Comparison tab to compare total interest paid over the life of each loan option.
No-Cost Refinancing
Some lenders offer no-closing-cost refinances by charging a slightly higher rate. This eliminates break-even risk but costs more over time. Best for borrowers who may move or refinance again within a few years. Toggle "Roll closing costs into new loan" to model this scenario.
The 1% Rule — A Starting Point
A common rule of thumb says refinance when rates drop 1%. In practice, the math depends on your specific balance, closing costs, and planned stay. Always calculate the actual break-even rather than relying on rules of thumb.