How to use this calculator
Put your current loan next to the offer you have in hand. The comparison covers both the monthly difference and the full remaining cost.
- Enter the current loan. Remaining balance, principal-and-interest payment, and rate. The remaining term is derived automatically.
- Set the new terms. Pick a term and the rate you were quoted. Shorter terms raise the payment and cut interest.
- Add costs and cash out. Discount points, closing costs, and any cash you want to take out.
The chart plots cumulative savings. Where the green line crosses zero is your break-even month; everything after it is money kept.
How to tell if it is worth it
A lower payment is not the same as a better loan. Check three things before you commit.
- Break-even against your timeline - If break-even is 24 months and you plan to stay for years, the savings are real. If you might sell in a year, the closing costs win.
- Lifetime cost, not just monthly - A new 30-year loan can lower the payment while raising total interest compared with the 15 years left on your current loan.
- The term reset - Refinancing starts the clock again. Keep the remaining term close to what you had, or go shorter, if the goal is to pay less overall.
Common reasons to refinance
- Lower the rate - The most common reason. Even a half-point cut can save thousands over the life of the loan.
- Move from adjustable to fixed - Locking in a fixed rate removes the risk of a payment jump when an ARM resets.
- Drop mortgage insurance - If values rose and you now have 20% equity, a refinance can remove PMI.
- Shorten the term - Moving from 30 years to 15 raises the payment but cuts total interest sharply.
- Take cash out - Access equity for renovations or debt consolidation. The balance grows, so compare the new payment carefully.
Frequently asked questions
When does refinancing make sense?
When the monthly savings cover the upfront cost before you sell, and when the new loan does not stretch your payoff so far that total interest rises. The break-even month and lifetime savings above answer both questions at once. If you plan to stay past break-even, a refinance usually pays off.
What is the break-even point on a refinance?
It is the number of months needed for the monthly savings to repay the closing costs and points. On a $250,000 loan with $3,000 in costs and $9 per month of savings, break-even takes 337 months. Lower costs or a bigger rate drop move it closer.
Does refinancing reset my loan term?
Yes, the new loan starts a fresh clock. Refinancing 10 years into a 30-year mortgage into another 30-year loan means 40 years of payments in total. Choosing a 20-year or 15-year term keeps the payoff from stretching and preserves more of the interest savings.
How much does a half-point rate drop save?
On a $300,000 loan, dropping half a percentage point saves roughly $90 per month and about $32,000 over 30 years. The exact amount depends on the balance and term, but even a small rate reduction is meaningful if you keep the loan long enough to clear the closing costs.
Should I finance closing costs or pay them upfront?
Paying upfront keeps the loan balance and monthly payment lower, but uses cash you may want for reserves. Financing them raises the balance and total interest. Compare both in the calculator with the same rate to see the long-term difference, and keep an emergency fund either way.
Can I take cash out when I refinance?
Yes, a cash-out refinance replaces your mortgage with a larger loan and pays you the difference. It can fund renovations or consolidate debt, but it increases the balance and interest. Enter the amount in the cash-out field to see how it changes the payment, break-even, and lifetime savings.
Estimates cover principal and interest only and assume a fixed rate with no prepayment penalty. Taxes, insurance, HOA, and lender-specific fees are excluded. Confirm figures with your loan officer.
