How to use this refinance calculator
- Current loan balance — the principal you still owe, shown on your monthly statement.
- Current rate and years remaining — used to rebuild your existing principal-and-interest payment and the interest still ahead of you.
- New rate and term — the rate quoted for the new loan and how long it runs.
- Closing costs — lender and third-party fees plus any discount points. The calculator assumes you pay them in cash at closing.
The three numbers that matter
Monthly savings is your current principal-and-interest payment minus the new one. Property tax and homeowners insurance stay the same either way, so they are left out.
Break-even point = closing costs ÷ monthly savings. It is the number of months of lower payments needed to earn back what you paid to refinance. Sell the home or refinance again before then and the refinance lost money.
Lifetime savings compares all the interest left on your current loan with all the interest on the new one, then subtracts closing costs. It catches the trap that the break-even figure misses: a lower payment that comes from stretching the loan over more years.
Worked example
You owe $250,000 at 7.25% with 27 years left, so your payment is $1,760.48. A lender offers 6.0% on a new 30-year loan with $5,000 in closing costs.
- New payment: $1,498.88, a saving of $261.61 a month.
- Break-even: $5,000 ÷ $261.61 = 19.11, so you are ahead after 20 months.
- Interest left on the current loan: $320,397. Interest on the new loan: $289,595.
- Lifetime savings after costs: $25,802 — positive, even though the new loan adds three years of payments.
Watch the term reset
Restarting at 30 years when you have 27 left means part of the lower payment comes from the lower rate and part from spreading the debt over more months. Here is the same refinance with different new terms:
| New term | Payment | Change | Total interest | Lifetime savings |
|---|---|---|---|---|
| 30 years | $1,498.88 | −$261.61 | $289,595 | $25,802 |
| 20 years | $1,791.08 | +$30.59 | $179,859 | $135,539 |
| 15 years | $2,109.64 | +$349.16 | $129,736 | $185,662 |
The 15-year option raises the payment but saves the most by far. A middle path: take the 30-year loan for its flexibility and keep paying your old amount. The extra goes to principal and pays the loan off well before the 30 years are up — the amortization calculator shows exactly how much sooner.
When refinancing tends to make sense
- You expect to stay in the home well past the break-even point.
- The rate drop is big enough to recover the costs within a few years. There is no universal threshold — half a point on a large balance can beat a full point on a small one, which is why it pays to run your own numbers.
- You want to move from an adjustable rate to a fixed rate before it resets higher.
- You can afford a shorter term and want to own the home sooner.
Things this calculator does not model
Rolling closing costs into the loan raises the balance and the payment, so the break-even comes later. "No-closing-cost" offers usually charge a higher rate instead of fees. A cash-out refinance increases what you owe, so compare it with other ways to borrow. Removing PMI, changing escrow and tax effects are also left out. Treat the results as estimates and compare the official Loan Estimates lenders must give you.
Frequently asked questions
How do I calculate the break-even point on a refinance?
Divide your total closing costs by the amount the new loan lowers your monthly principal-and-interest payment. $4,000 in costs and $200 a month in savings means a 20-month break-even.
Can I roll the closing costs into the new loan?
Usually, yes, if you have enough equity. You avoid paying cash, but you pay interest on the costs for the life of the loan and your payment is slightly higher. To model it here, add the costs to the balance and set closing costs to zero.
Why are my lifetime savings negative when my payment goes down?
Because the new loan runs longer than what is left on your current one. Paying for extra years can outweigh the lower rate, even though each payment is smaller.
Does refinancing restart my amortization?
Yes. A new loan starts a new schedule, so early payments are again mostly interest. That is why a shorter new term, or keeping your old payment amount, preserves more of the benefit.
Is it worth refinancing for a 1% lower rate?
Often, but it depends on your balance, closing costs and how long you will stay. Enter your numbers above: if the break-even point is comfortably shorter than the time you expect to keep the loan, the refinance is likely worth it.
Last updated: October 8, 2026