Refinance Calculator
Calculate your monthly savings and break-even point when refinancing a mortgage.
The Formula
Break-Even Months = Closing Costs / Monthly Savings
New Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
Old payment: $1,748 · New payment: $1,580
Monthly savings = $168 · Closing costs: $4,500
Break-even = 27 months
When Does Refinancing Make Financial Sense?
Refinancing replaces your existing mortgage with a new one — ideally at a lower interest rate, a shorter term, or both. The traditional rule of thumb is to refinance when you can lower your rate by at least 1%, but this is an oversimplification. What actually matters is the break-even point: how many months until your cumulative monthly savings exceed the upfront closing costs. If you will stay in the home longer than the break-even period, refinancing saves money. If you plan to sell or move before then, the costs probably do not justify it.
Calculating Your Break-Even Point
Closing costs on a refinance typically run 2–6% of the loan amount. On a $300,000 loan, that is $6,000–$18,000. Divide total closing costs by your monthly payment savings to get your break-even in months. If refinancing saves you $250 per month and costs $7,500 in closing costs, break-even is 30 months. If you plan to stay at least two and a half years, refinancing makes sense. This calculator shows your exact break-even so you can make an informed decision.
Refinancing to a Shorter Term
Refinancing from a 30-year to a 15-year mortgage increases monthly payments but dramatically cuts total interest. On a $300,000 balance at 7%, remaining interest on a 30-year is roughly $418,000. A 15-year refinance at 6.25% has about $160,000 in remaining interest — a $258,000 difference. The monthly payment jumps, but for borrowers who can handle it, the long-term savings are substantial. Some people refinance to a new 30-year to lower monthly payments during a tight period, which helps cash flow but resets the amortization clock.
Frequently Asked Questions
How much does it cost to refinance?
Refinancing typically costs 2–6% of the loan amount in closing costs — on a $300,000 loan, that is $6,000–$18,000. These costs include origination fees, title insurance, appraisal, recording fees, and prepaid interest. Some lenders offer no-closing-cost refinances, but costs are usually rolled into the loan balance or offset by a higher interest rate, so you pay eventually either way.
Can I refinance to remove PMI?
Yes. If your home has appreciated or you have paid down enough principal to have 20% equity, you can refinance into a conventional loan without PMI. This can make sense even if your new rate is similar to your current rate, as long as the PMI savings justify the closing costs over your expected holding period.
What is a cash-out refinance?
A cash-out refinance replaces your mortgage with a larger one and gives you the difference in cash. If you owe $200,000 on a home worth $350,000, you might refinance for $250,000 and receive $50,000 cash. Common uses include home improvements, debt consolidation, and large expenses. The tradeoff: you are borrowing against your equity and increasing your loan balance, which means more interest paid over time.
Does refinancing hurt my credit score?
Temporarily, yes. A refinance involves a hard credit inquiry and a new account opened, both of which can lower your score by a few points. Most people see their score recover within 3–6 months. If you are rate shopping, getting multiple mortgage quotes within a 14–45 day window is typically treated as a single inquiry under most credit scoring models.
Is refinancing worth it if my rate is already low?
If your rate is already competitive, the math gets harder to justify given closing costs. However, if you have significant time remaining on a 30-year and can refinance to a 15-year at a similar or lower rate without dramatically increasing your payment, it may still make sense for the total interest savings. Always run the break-even calculation with your actual numbers before deciding.