Mortgage Refinance Calculator (Break-Even & Savings)
Compare your current mortgage against a refinance — new payment, monthly savings, closing-cost break-even point, and total interest saved over your planned time in the home, with a clear worth-it verdict.
Refinance — interactive calculator, computed instantly in your browser.
Should You Refinance? Break-Even, Savings, and the Reset Trap
Break-Even = Closing Costs ÷ Monthly Savings
| Scenario | Monthly Savings | $6,000 Costs | Break-Even |
|---|---|---|---|
| 6.75% → 5.85% | $235 | $6,000 | 26 months |
| 6.75% → 5.25% | $355 | $6,000 | 17 months |
| 6.75% → 6.25% | $152 | $6,000 | 39 months |
Key Point: The rate gap sets your savings; closing costs set how long you wait to profit. If you sell or refinance again before break-even, the refinance loses money.
Refinancing replaces your existing mortgage with a new loan — ideally at a lower rate, a shorter term, or to pull out equity. The decision comes down to one number: the break-even point, the month at which cumulative monthly savings recover the closing costs you paid upfront.
1. The Break-Even Formula
Compare your current loan against the new one on the same principal balance, then divide upfront costs by monthly savings. Everything else is context around this core ratio:
- Monthly savings = old P&I payment − new P&I payment (compare on the same remaining balance).
- Closing costs typically run 2–5% of the loan amount (appraisal, title, origination, points).
- Rule of thumb: if break-even exceeds your expected time in the home, do not refinance.
2. The Amortization Reset Trap
Extending your term back to 30 years can lower the monthly payment yet cost more in total interest — you restart the amortization clock with a fresh balance. A 20-year remaining loan refinanced into a new 30-year term adds a decade of payments. Always compare the total interest over your actual time horizon, not just the monthly figure.
A shorter term (15-year) raises the payment but cuts lifetime interest sharply and usually carries a lower rate. Run both against your budget.
3. Rate-and-Term vs Cash-Out Refinance
A rate-and-term refinance changes the rate, term, or both, keeping the balance roughly the same. A cash-out refinance borrows more than you owe, pays you the difference, and raises the balance — useful for consolidating high-interest debt or funding improvements, but it extends secured debt against your home and resets the term on the larger amount.
- Cash-out threshold: lenders generally cap total LTV at 80% for conventional loans without PMI.
- Closing costs on cash-out are often slightly higher; factor them into the break-even too.
4. Worked Example and Decision Checklist
A borrower with $320,000 remaining at 6.75% over 28 years refinances to 5.85% over 30 years with $6,000 in costs. The calculator shows the old and new payments, monthly savings, break-even month, and total interest over a chosen plan horizon, then renders a worth-it verdict. Before committing:
- Confirm you will stay past the break-even month.
- Compare total interest over your horizon, not just the payment.
- Check the effect on your debt-to-income with the 📊 Debt-to-Income Calculator.
- Read where each payment goes with the 🏠 Mortgage Calculator.
🔗 Home Financing Cross-References
A refinance restarts the amortization clock — read where every payment goes with the 🏠 Mortgage Calculator, and keep the new payment inside lender qualifying ratios using the 📊 Debt-to-Income Calculator.
Compare the break-even month against renting the same home inside the 💰 Financial Hub, and see whether keeping the old loan to invest the closing costs wins with the 🏠 Rent vs Buy Calculator.
Frequently Asked Questions (Refinance)
Compare the break-even point against how long you expect to keep the home. Divide your closing costs by the monthly savings to get the break-even in months. If you will sell, move, or refinance again before reaching that point, refinancing loses money. If you stay well past it, the accumulated savings can far exceed the upfront cost.
Closing costs generally run 2% to 5% of the loan amount and include appraisal, title insurance, origination fees, and points. On a $320,000 loan that is roughly $6,400 to $16,000. Some lenders offer no-closing-cost refinances, but they roll the fees into a higher rate, which raises the payment and lengthens your break-even.
Yes, if you extend the term. Restarting a 30-year clock on a loan with 20 years remaining adds a decade of payments and can increase total interest even at a lower rate. To avoid this, refinance into a term that matches or shortens your remaining payoff timeline, or make extra principal payments to offset the reset.
A rate-and-term refinance changes only the interest rate and/or loan term, keeping the balance about the same. A cash-out refinance borrows more than you owe, pays you the difference, and increases your balance — useful for consolidating high-interest debt but riskier because it puts more of your home at stake and usually caps total LTV at 80%.
The rate gap between your old and new loan drives your monthly savings, which sets the denominator in the break-even formula. A larger gap means bigger savings and a faster break-even; a small gap means slow payback where closing costs can dominate. This is why a refinance only makes sense when rates have dropped meaningfully — often cited as at least 0.75% to 1% below your current rate.