How to use the refinance calculator
- Enter your current loan. Use the remaining balance and years left from your latest mortgage statement, not the original loan amount.
- Enter the new offer. Rate, term and the closing costs from the lender's Loan Estimate. Refinance closing costs are often 2% to 5% of the loan.
- Add cash out if you plan to borrow extra. The calculator adds it to the new loan.
- Read the break-even point. If you expect to stay in the home longer than that, the refinance usually pays off.
Refinance formulas
Monthly savings = current payment − new payment
Break-even (months) = closing costs ÷ monthly savings
Payments here are principal and interest only. Taxes, insurance and PMI usually stay about the same after a refinance.
Worked example
You owe $300,000 at 7.5% with 27 years left, so you pay about $2,162 a month. A new 30-year loan at 6.25% costs about $1,847, saving $315 a month. With $6,000 in closing costs, the savings cover the costs in month 20 (about 1.6 years).
Because the new loan runs 3 years longer, the lifetime saving is smaller than the monthly saving suggests: about $29,600 after closing costs. Choosing a 25-year term instead keeps the payment near $1,979 and raises the lifetime saving to about $100,900.
When does refinancing make sense?
- The rate drops enough. A common rule of thumb is at least 0.75 to 1 point lower, but the break-even month is a better test than any rule.
- You will stay past break-even. If you might sell in two years, a 3-year break-even loses money.
- You want a shorter term. Moving from 30 to 15 years raises the payment but can save a large amount of interest.
- You want to drop PMI or switch from an adjustable rate to a fixed rate.
Watch out for
- Restarting the clock. Refinancing year 3 of a 30-year loan into a new 30-year loan adds years of payments.
- Rolled-in costs. Financing closing costs makes the loan bigger.
- Cash-out risk. Borrowing against the home raises the balance you must repay.
Only need a smaller amount? Compare with a HELOC. Buying instead? Use the closing cost calculator.
Estimates for planning only, not financial advice. Get a Loan Estimate from at least three lenders.
Frequently asked questions
How do I know if refinancing is worth it?
Divide the closing costs by the monthly savings to get the break-even point in months. If you will keep the loan longer than that, refinancing usually saves money. Also compare total interest, since a longer term can cost more overall.
How much does it cost to refinance?
Closing costs are typically 2% to 5% of the loan amount, covering lender fees, appraisal, title insurance and prepaid items. On a $300,000 loan that is roughly $6,000 to $15,000.
How much lower should my rate be to refinance?
Many people use 0.75 to 1 percentage point as a rule of thumb, but the right answer depends on your closing costs and how long you will stay. The break-even month in the calculator answers it directly.
Does refinancing reset my mortgage?
Yes. A new loan starts a new term. Refinancing into another 30-year loan can lower the payment but stretch payments out longer. Choose a term close to your remaining years to avoid that.
Can I refinance and take cash out?
Yes, a cash-out refinance replaces your mortgage with a larger one and pays you the difference. Most lenders cap the new loan at about 80% of the home's value.
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Last updated October 2026.