Refinance Calculator
Compare old and new loan payments and closing cost break-even.
A refinance calculator compares your current mortgage payment against a new loan's payment to determine whether refinancing saves money, and calculates the break-even point - how many months it takes for your monthly savings to cover the closing costs of the new loan.
Enter your current loan balance and rate, the new rate you've been offered, and the estimated closing costs to see your new monthly payment, monthly savings, and break-even timeline.
Worked Calculation Examples
| Scenario | Result | Calculation Step |
|---|---|---|
| $4,000 closing costs, $150/month savings | ≈27 months to break even | Break-even = $4,000 ÷ $150 ≈ 26.7 months, rounded up to 27 - if you plan to keep the loan longer than that, refinancing is likely worth the upfront cost. |
| Old payment $2,100, new payment $1,850, $6,000 closing costs | 24 months to break even | Monthly savings = $2,100 − $1,850 = $250. Break-even = $6,000 ÷ $250 = 24 months exactly. |
The Break-Even Calculation That Actually Matters
Refinancing isn't free - it typically comes with closing costs similar to a new mortgage, often 2%-5% of the loan amount. The key question isn't just whether your rate will drop, but how long until your monthly savings pay back those closing costs. Dividing total closing costs by your monthly payment savings gives the break-even point in months. If you plan to stay in the home (or keep the loan) longer than that break-even period, refinancing is likely worth it financially; if you might sell or refinance again sooner, the closing costs may not be recovered.
How Much of a Rate Drop Justifies Refinancing
There is no single universal threshold, but a commonly cited rule of thumb suggests a rate drop of at least 0.5 to 1 percentage point is often needed to make refinancing worthwhile once closing costs are factored in - smaller drops can still make sense on larger loan balances, since the dollar savings scale with the loan amount, while the closing costs mostly do not.
Resetting the Clock: A Hidden Cost of Refinancing
Refinancing into a new 30-year loan after you've already paid down several years of your original mortgage resets your amortization schedule, meaning you go back to paying mostly interest in the early years of the new loan. Comparing total interest paid over the full remaining life of both the old and new loans - not just the monthly payment - gives a more complete picture than looking at the payment drop alone, especially if you refinance into a new full-length term rather than matching your remaining term.
How to Use the Refinance Calculator
- Open the Refinance Calculator and enter the values requested in the input fields.
- Check the units, percentages, dates, or time periods before reading the answer.
- Review the instant result and adjust any value to compare another scenario.
- Use the formula, example, and FAQs below to understand how the refinance calculator works.
Frequently Asked Questions
How do I know if refinancing my mortgage is worth it?
Compare your monthly payment savings against the closing costs to find your break-even point in months. If you plan to keep the loan longer than that break-even period, refinancing is generally worth it financially.
How much should interest rates drop before I refinance?
A commonly cited guideline is at least 0.5 to 1 percentage point, though the right threshold depends on your loan balance, remaining term, and how long you plan to keep the loan.
What are typical refinance closing costs?
Refinance closing costs typically run 2%-5% of the loan amount, covering fees like appraisal, title search, and loan origination - similar in structure to closing costs on an original mortgage.
Does refinancing reset my loan term?
If you refinance into a new 30-year loan, yes - you restart the amortization schedule, which means paying mostly interest again in the early years, even if your monthly payment is lower.
Can I refinance to a shorter term instead of a longer one?
Yes, many borrowers refinance from a 30-year to a 15-year term when rates drop, which can increase the monthly payment but significantly reduce total interest paid over the life of the loan.
Is mortgage interest still tax-deductible after refinancing?
In the U.S., mortgage interest may still be deductible if you itemize deductions, subject to current tax law limits - consult a tax professional for your specific situation, as rules can change and depend on loan amount and filing status.
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Last updated: September 27, 2026.