Refinance Calculator

How to tell if refinancing is worth it

Refinancing replaces your current loan with a new one. It makes sense when the savings outweigh the closing costs before you sell or pay off the home. The key number is the break-even point:

Break-even (months) = closing costs ÷ monthly savings

Worked example

A $280,000 balance at 7.25% with 27 years left has a payment of $1,971.74. Refinancing into a 30-year loan at 6.0% drops it to $1,678.74, saving $293.00 a month. With $6,000 of closing costs, the break-even point is 6,000 ÷ 293 = 21 months. If you stay longer than that, the refinance pays off.

Notice the new loan restarts a 30-year clock. Total interest on the new loan is about $324,347, compared with $358,845 left on the old one, so this refinance still saves money overall. Shortening the new term to match the old one saves even more.

Things to compare

• Closing costs, including lender fees, appraisal and title.
• Whether the new term is longer than the time left on your current loan.
• The APR, which includes fees, rather than just the rate.
• How long you plan to stay in the home.

Results are estimates and exclude taxes, insurance and PMI. Ask your lender for a Loan Estimate to see official figures.

Frequently asked questions

When is it worth refinancing?

When you will keep the loan longer than the break-even point and the lifetime cost, including closing costs, is lower than staying with your current loan.

How much do closing costs usually cost?

Closing costs for a refinance are commonly about 2–5% of the loan amount, though some lenders offer lower-cost options with a slightly higher rate.

Does refinancing restart my loan?

Yes. A new loan starts a new term. Choosing a shorter term avoids stretching out your payments.

Can refinancing lower my payment but cost more?

Yes. Extending the term lowers the monthly payment but can increase total interest. The calculator shows the lifetime cost difference.