Should you refinance your mortgage?
Use this calculator to compare your current loan with a new refinance offer. It will calculate your monthly savings, lifetime interest savings, and the "break-even point"—the time it takes for your savings to cover the closing costs. If you're still shopping, browse today's mortgage rates to find a competitive offer to plug in.
Refinance Analysis
Compare your current loan vs. a new loan.
| Comparison | Current Loan | New Loan | Difference |
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Understanding the Results
Monthly Savings vs. Cost: If you switch to a shorter term (e.g., 30 years to 15 years), your monthly payment will likely increase (shown in red) because you are paying off the principal much faster. However, check the "Lifetime Savings" to see the massive amount of interest you will save.
- Monthly Savings: The difference between your current principal & interest payment and the new one.
- Break-Even Point: How long you must stay in the home to recover the closing costs. If your monthly savings are negative (cost increase), there is no break-even point on a cash-flow basis.
- Lifetime Savings: The total amount of interest you save over the life of the loan.
How to Use the Refinance Calculator
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Enter your current loan details
Type in your current loan balance, your existing interest rate, and the number of years you have left on your mortgage. Use your most recent statement for the most accurate balance.
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Enter the proposed new loan
Enter the new interest rate you've been quoted and the term length for the refinance — commonly 15, 20, or 30 years. The calculator will use the same balance unless you're rolling closing costs into the loan.
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Add your closing costs
Enter the total estimated closing costs for the refinance. Typical closing costs run 2% to 5% of the new loan amount. If you don't have a Loan Estimate yet, 3% is a reasonable starting figure.
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Review your results
The calculator shows your new monthly principal & interest payment, the total interest savings over the life of the loan, and the break-even point — how many months you need to keep the loan to recoup the closing costs. Adjust the inputs to test different scenarios.
When Does Refinancing Make Sense?
The most common rule of thumb is the break-even rule: refinancing makes sense if you plan to stay in the home longer than the break-even point. If your closing costs are $4,500 and your monthly savings are $150, your break-even is 30 months — so if you'll stay at least three years, you come out ahead. Sell or refinance again before then, and the closing costs eat your savings. For a deeper look at the trade-offs, see our guide on when to refinance a mortgage.
Beyond the break-even, a few other situations tip the math toward refinancing:
Refinancing often makes sense when
- Current rates are at least 0.5% to 0.75% below your existing rate
- You plan to stay in the home well past the break-even point
- You're switching from an ARM to a fixed rate before a rate adjustment
- You want to drop PMI by reaching 20% equity through a new appraisal
- You can shorten the term — for example, going from a 30-year to a 15-year mortgage — and afford the higher payment, since the lifetime interest savings are usually substantial
Refinancing rarely makes sense when
- You plan to sell or move within a couple of years
- The rate drop is less than 0.25% and closing costs are typical
- You're early in your current loan and would restart a 30-year amortization, paying mostly interest again
- Your credit score has dropped, meaning you'd qualify for a worse rate than you have now
- You're tempted to do a cash-out refinance to pay off short-term debt — this turns 5-year debt into 30-year debt
One more thing to watch: if you've been paying on a 30-year loan for 7 years and refinance into another 30-year loan, you've added 7 years of interest payments. Even at a lower rate, the lifetime cost can go up. Always compare the lifetime savings figure, not just the monthly payment.
Frequently Asked Questions
Why did my monthly payment go up?
If you refinance into a shorter term (e.g., 27 years remaining down to 15 years), you have fewer months to pay back the principal. Even with a lower interest rate, paying the debt off faster usually requires a higher monthly payment.
What are closing costs?
Closing costs are fees charged by lenders and third parties to process your loan. They typically range from 2% to 5% of the loan amount and include the origination fee, appraisal, title insurance, recording fees, and prepaid escrow items.
Does refinancing hurt my credit score?
Temporarily, yes. The lender will perform a hard pull on your credit, which may drop your score by a few points. The drop is usually small and recovers within a few months as you make on-time payments on the new loan.
How much does it cost to refinance a mortgage?
Most homeowners pay between 2% and 5% of the loan amount in closing costs. On a $300,000 refinance, that's roughly $6,000 to $15,000. Some lenders offer "no closing cost" refinances, but those typically come with a higher interest rate — you're paying the costs over time instead of upfront.
What is a break-even point and how do I read it?
The break-even point is the number of months you must keep the new loan before your monthly savings cover the closing costs. If closing costs are $4,800 and you save $200 a month, your break-even is 24 months. After that point, every additional month is pure savings. If you sell before the break-even, the refinance cost you money.
Should I refinance to a 15-year or stay with a 30-year?
A 15-year loan typically carries a lower interest rate and saves a substantial amount in lifetime interest, but the monthly payment is higher. Choose a 15-year if you can comfortably afford the higher payment and want to be debt-free faster. Stay with a 30-year if you'd rather keep the lower payment for cash-flow flexibility — you can always pay extra principal voluntarily.
Does refinancing reset my loan?
Yes — a refinance pays off your old loan and starts a new amortization schedule. If you refinance a 30-year loan into another 30-year loan, you've extended your total payoff timeline. Compare the lifetime interest figure carefully; a lower rate doesn't always mean a lower total cost if you're stretching the term.
How much equity do I need to refinance?
Most conventional lenders require at least 20% equity to refinance without paying private mortgage insurance (PMI). You can often refinance with less equity, but PMI will be added to your payment. FHA streamline and VA IRRRL programs have more lenient equity requirements for qualifying borrowers.
What's the difference between a rate-and-term refinance and a cash-out refinance?
A rate-and-term refinance changes your interest rate, your loan term, or both, but the loan balance stays roughly the same. A cash-out refinance increases your loan balance and gives you the difference in cash, using your home equity. Cash-out refinances usually carry slightly higher rates and have stricter equity requirements.
