Refinance Calculator
Compare a new mortgage to your current one and find the break-even point.
Refinance: when does it pay off?
Refinancing replaces your current mortgage with a new one — ideally at a lower rate, different term, or both. The math hinges on two numbers: your monthly savings (old payment minus new payment) and your closing costs (typically 2–5% of the loan). Divide costs by savings and you have the break-even month.
The right rate drop varies. At $100k balances, you usually want a full 1% drop. At $500k+, even 0.5% is worth it. Cash-out refinancing (taking out more than you owe) is a different calculation — you're trading equity for liquidity, usually at a 0.25–0.75% rate premium versus rate-and-term.
Frequently asked questions
How do I know if refinancing is worth it?
Calculate your break-even point: divide your closing costs by your monthly savings. If you'll stay in the home past the break-even month, refinancing pays off. A 1% rate drop on a $300,000 loan typically saves $180/month; with $4,000 in closing costs, you break even in about 22 months.
What's the difference between rate-and-term and cash-out refinance?
Rate-and-term refinancing only changes your interest rate and/or loan length — your balance stays the same. Cash-out refinancing gives you a larger loan than you currently owe and pays out the difference in cash at closing. Cash-out rates are usually 0.25–0.75% higher.
What are typical refinance closing costs?
2–5% of the loan amount, covering lender origination fees, appraisal ($400–800), title insurance, recording fees, and any required escrow. Some lenders offer 'no-closing-cost' refinancing by folding the fees into a slightly higher rate — use this calculator to check whether the no-cost option or the paid option wins over your expected holding period.
Does refinancing reset my amortization clock?
Yes. A new 30-year refinance 8 years into your original loan means you'll be paying for 38 total years. To avoid this, match your new term to the remaining years on the old loan (e.g., refinance to a 22-year loan), or aggressively pre-pay the new loan.
When is the 'right' rate drop to refinance?
The old rule was 1% lower, but with lower balances and faster online processing, 0.5–0.75% is often enough. The right question is always the break-even math relative to how long you plan to stay — not the headline rate gap.
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