How the refinance comparison works
The calculator works out the payment on your current loan from its remaining balance, rate and years left, and the payment on the new loan from the same balance at the new rate and term. The difference is your monthly saving. The break-even point is the closing costs divided by the monthly saving.
Example
A $300,000 balance at 7.25% with 28 years left costs $2,088.47 a month. Refinancing into a 30-year loan at 6.25% brings the payment to $1,847.15, a saving of $241.32 a month. With $5,000 of closing costs, you break even after about 21 months. If you stay in the home for at least that long, the refinance pays for itself.
The catch: the term
In that example, the new loan restarts a 30-year clock, so you pay for two extra years. Adding up every payment, refinancing still comes out about $31,800 cheaper because of the lower rate. But if you choose a 25-year term instead, the payment is $1,979.01, still lower than today's, and the total cost drops by about $103,000. Shorter terms save more interest overall. If you want the lowest lifetime cost, choose a term close to what you have left.
Things to check before refinancing
- Closing costs. These often run from about 2% to 5% of the loan. Ask for a written estimate and check for any prepayment penalty on your current loan.
- How long you will stay. If you might move before the break-even point, refinancing may not pay off.
- Cash-out and fees rolled into the loan. Adding fees to the balance means you pay interest on them. This calculator assumes you pay closing costs up front.
- PMI and escrow. Changes to these can shift your real monthly saving.
Read our guide on whether you should refinance for a step-by-step checklist. This tool is for planning only and is not financial advice.