Finance
Refinance Calculator
Refinancing swaps your loan for a new one — the win is a lower payment, the test is the break-even, closing costs ÷ monthly savings. Enter your current loan and the new offer for the new payment, the saving, the break-even month, and the lifetime interest, old vs new.
Your current loan
What you still owe on the loan today
$
The annual rate on your existing loan
%
How many payments are left on the current loan
months
The new loan
The annual rate you are being offered
%
Years on the new loan — a longer term lowers the payment but costs more
years
Lender and third-party fees to close the refinance
$
How to pay the closing costs
Added to the new balance — no cash needed at closing.
Extra cash borrowed on top of the balance
$
Monthly savings
$382.90
$2,120.34 → $1,737.43 a month
Break-even
It takes 16 months (1 year 4 months) of savings to earn back the $6,000 in closing costs. After that, the saving is yours. Note: the new term runs longer than your current loan, so check the lifetime figure below.
Current payment
$2,120
New payment
$1,737
Monthly savings
$383
Break-even
16 mo
New loan amount
$306,000
Lifetime savings
$10,625
Interest, old vs new
Interest left on the current loan is $336,101; the new loan charges $319,476 over its full term. A longer term can lower the payment yet raise total interest — weigh both.
Estimate only. Your actual rate, closing costs and savings depend on your lender, credit and the property.
Try a scenario
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The basics
What refinancing actually does
A refinance pays off your current loan with a new one, ideally at a lower rate. Two numbers decide whether it is a good idea.
old payment − new payment
The monthly saving is the prize
A lower rate, a fresh term, or both, cut the payment. The saving is the gap between the old payment and the new one — but it is only worth something once it has paid for the refinance.
$2,120.34 → $1,737.43 saves $382.90 a month
closing costs ÷ monthly savings
The break-even is the test
Every refinance costs money to close. The break-even is how many months of saving it takes to earn that back. Keep the loan past it and you win; leave before it and you lost money.
$6,000 ÷ $382.90 = 16 months to break even
Method
How to work out a refinance by hand
Five steps take you from your current statement to the break-even month.
- 1
Find the payment on the loan you have now
Use your current balance, rate and the months left. This old payment is the number the refinance has to beat.
$300,000 at 7.00% over 300 months = $2,120.34 - 2
Build the new loan amount
Start with the balance, add any cash-out, and add the closing costs if you are rolling them in. That total P is what the new loan finances.
$300,000 + $6,000 rolled costs = $306,000 - 3
Compute the new payment
Apply the level-payment formula to the new amount at the new rate over the new term. This is the new payment.
M = P·i ÷ (1 − (1 + i)^−n) = $1,737.43 - 4
Take the monthly saving
Subtract the new payment from the old one. A positive number is what you save every month; a negative one means the refinance costs more.
$2,120.34 − $1,737.43 = $382.90 - 5
Divide the costs by the saving for the break-even
The break-even is the number of months of saving it takes to earn the closing costs back. Keep the loan longer than that and you are ahead.
$6,000 ÷ $382.90 = 16 months
Worked examples
Savings by size of the rate drop
$300,000 balance with 25 years left, refinanced into a 30-year loan with $6,000 of costs rolled in. The bigger the drop, the faster the break-even.
| Rate drop | New rate | New payment | Monthly saving | Break-even |
|---|---|---|---|---|
| −0.5% | 6.50% | $1,934.13 | $186.21 | 33 mo |
| −1.0% | 6.00% | $1,834.62 | $285.71 | 22 mo |
| −1.5% | 5.50% | $1,737.43 | $382.90 | 16 mo |
| −2.0% | 5.00% | $1,642.67 | $477.66 | 13 mo |
| −2.5% | 4.50% | $1,550.46 | $569.88 | 11 mo |
Even a 0.5% drop saves $186.21 a month and pays for itself in 33 months. A larger balance makes each point worth more.
Where it shows up
When people refinance
Three situations where running the break-even is the deciding step.
rates have fallen
Chasing a lower rate
The classic case. When market rates fall below your locked rate, a rate-and-term refinance turns the gap into a monthly saving.
A 1-point drop on a large balance pays off fast
shorten the term
Paying off sooner
Refinancing from 30 years into 15 raises the payment but slashes total interest — a way to be debt-free years earlier if the higher payment fits.
15-year here: $2,500.28/mo, far less interest
tap equity
Cash-out for a big expense
A cash-out refinance converts home equity into cash for renovations or debt payoff, usually cheaper than an unsecured loan but at the cost of a bigger mortgage.
Borrow above the balance, take the difference in cash
Reference
Break-even at a glance
How long $6,000 of closing costs take to earn back at different monthly savings. The more you save each month, the sooner the refinance is ahead.
| Monthly saving | Break-even on $6,000 | In plain terms |
|---|---|---|
| $100 | 60 months | 5 years |
| $150 | 40 months | 3 years 4 months |
| $200 | 30 months | 2 years 6 months |
| $300 | 20 months | 1 year 8 months |
| $400 | 15 months | 1 year 3 months |
| $500 | 12 months | 1 year |
Worth knowing
Six things that decide a refinance
Each of these can change the answer more than the headline rate does.
a new clock starts
The term-reset trap
Refinancing back into a 30-year loan stretches out the payoff. The payment falls, but paying for longer can raise total interest. Match the new term to what you have left, or keep overpaying.
the costs never vanish
No-cost refinance
A "no-cost" refinance does not remove the costs — it folds them into a higher rate or a bigger balance. It can be right if you will not keep the loan long, but you are still paying, just differently.
the one true test
Break-even beats rules of thumb
"Refinance if the rate drops 1%" ignores your balance and costs. A large balance justifies a smaller drop; high costs demand a bigger one. Always run the break-even.
rate-and-term vs cash-out
Know which one you are doing
Cash-out raises the balance and usually the rate. If you only want a lower payment, keep it rate-and-term — do not turn a money-saving move into more debt.
2% to 5% of the loan
What the closing costs are
Origination, appraisal, title, settlement and recording fees, plus optional points. Ask for a loan estimate and compare it line by line between lenders — fees vary widely.
sometimes the answer is no
When not to refinance
If you plan to move before the break-even, if your credit has slipped, or if the new term undoes years of progress, staying put can be the better call.
Quick chart
New payment, by rate and term
Pick a new loan amount and read the monthly payment at every rate from 3.0% to 7.5% across four terms. Compare it to your current payment to see the saving.
New loan amount
Show
Monthly payment on $300,000, by rate and term.
| Rate | 30 years | 20 years | 15 years | 10 years |
|---|---|---|---|---|
| 3.00% | $1,265 | $1,664 | $2,072 | $2,897 |
| 3.50% | $1,347 | $1,740 | $2,145 | $2,967 |
| 4.00% | $1,432 | $1,818 | $2,219 | $3,037 |
| 4.50% | $1,520 | $1,898 | $2,295 | $3,109 |
| 5.00% | $1,610 | $1,980 | $2,372 | $3,182 |
| 5.50% | $1,703 | $2,064 | $2,451 | $3,256 |
| 6.00% | $1,799 | $2,149 | $2,532 | $3,331 |
| 6.50% | $1,896 | $2,237 | $2,613 | $3,406 |
| 7.00% | $1,996 | $2,326 | $2,696 | $3,483 |
| 7.50% | $2,098 | $2,417 | $2,781 | $3,561 |
Principal and interest on the new loan — add escrow items separately. Roll-in of closing costs raises the amount financed; use the calculator above for the exact figure.
How we calculate this
The formula and our assumptions
Both payments use the standard amortizing-loan formula; the break-even is a simple ratio.
M = P·i ÷ (1 − (1 + i)^−n)
Each payment
P is the balance (old) or the new loan amount, i the annual rate ÷ 12, and n the number of payments. A zero rate makes the payment simply P ÷ n.
break-even = costs ÷ monthly saving
The break-even
Closing costs divided by the monthly payment saving, rounded up to a whole month. It uses the full closing cost whether you roll it in or pay it upfront, because either way it is money spent to get the lower payment.
- Both loans are fixed-rate and fully amortizing; adjustable-rate loans are not modelled.
- Lifetime savings compares every remaining old payment to every new payment plus any upfront cost.
- A longer new term can lower the payment yet raise total interest — the figures show both so the trade-off is visible.
- Taxes, insurance and PMI are excluded; they do not change with a rate-and-term refinance.
Where to refinance
Where to shop for the new loan
Rows are ordered by borrower fit, not by any payout — the option that suits your situation comes first for you. Rates are shown as ranges only; get an exact quote, because pricing depends on your credit, your equity and the day.
| Where | Examples | Best for | Typical pricing |
|---|---|---|---|
| Online marketplace | LendingTree, Credible | Comparing several refinance quotes at once | Market range |
| Your current servicer | The lender you pay now | A streamlined refinance, less paperwork | Market range |
| Credit union | Member-owned lenders | Lower fees, which lowers the break-even | Often below market |
| Direct bank / lender | Rocket, Chase, local banks | An existing banking relationship | Market range |
CalculateThis.io is not a lender and does not make credit decisions. When we add lender links they will be marked as sponsored, and we may earn a commission if you apply through one — it does not change the rate you are offered.
Sources
Where the method comes from
- Consumer Financial Protection Bureau — refinancing guidance, the loan estimate, and break-even.
- Federal Reserve — "A Consumer's Guide to Mortgage Refinancings."
- Standard amortization formula for a fixed-rate, fully amortizing loan.
FAQ
Common questions
It is worth it when you keep the loan past the break-even point — the month the payment savings have repaid the closing costs. On the example here, dropping from 7.00% to 5.50% on a $300,000 balance saves $382.90 a month and breaks even in 16 months. If you plan to move or pay off the loan before then, the refinance loses money. The rule of thumb is to look for a rate at least 0.5 to 1 point below your current one, but the break-even is the real test.
Break-even is the closing costs divided by the monthly payment saving. With $6,000 in costs and a $382.90 monthly saving, that is $6,000 ÷ $382.90 = 16 months, or about 1 year 4 months. Keep the loan longer than that and the refinance is ahead; sell or pay it off sooner and you have spent more on costs than you saved. Rolling the costs into the loan removes the upfront cash need but you still pay for them, so the break-even is measured the same way.
Yes — a new loan starts a new clock. If you have 25 years left and refinance into a fresh 30-year loan, you have stretched the payoff back out. That lowers the payment but can raise the total interest even at a lower rate, because you are paying for longer. On this example the new loan charges $319,476 of interest against $336,101 left on the old one. To avoid the trap, refinance into a term no longer than what you have left, or keep making the old, higher payment on the new lower-rate loan.
They are the lender and third-party fees to originate the new loan: an origination or underwriting fee, an appraisal, title insurance and settlement, credit and recording fees, and sometimes discount points to buy the rate down. On a typical mortgage refinance they run about 2% to 5% of the loan amount. You can pay them in cash at closing, or roll them into the new balance — the calculator shows both, and either way they count toward the break-even.
A rate-and-term refinance replaces the loan with a better rate or term and nothing more — the new balance equals the old one plus any rolled costs. A cash-out refinance borrows more than you owe and hands you the difference in cash, using your home equity. Cash-out raises the balance and the payment, and usually carries a slightly higher rate. Adding $50,000 of cash-out to this example, for instance, pushes the new payment back up. Use rate-and-term to save money; use cash-out only when you need the funds and the rate still beats the alternatives.
There is no fixed number — it depends on your balance and closing costs, because those set the break-even. A bigger balance means each point of rate saves more, so a smaller drop pays off. On the $300,000 example, a 0.5% drop saves $186.21 a month and breaks even in 33 months, while a 2.0% drop saves $477.66 and breaks even in 13. Run your own numbers rather than relying on a one-size rule.
Only slightly and briefly. The lender runs a hard inquiry when you apply, which typically costs a handful of points for a few months, and the new loan lowers the average age of your accounts. Rate-shopping several lenders inside a short window (usually 14 to 45 days) counts as a single inquiry, so compare offers freely. The old loan closing and the new one opening is a normal, expected pattern and the effect fades quickly with on-time payments.
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Ugo CharlesBuilt and fact-checked against our editorial standards · Last updated June 2026
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