Refinance Calculator

The short answer

• Divide the closing costs by the monthly saving: that is how many months it takes to break even.
• Refinancing $300,000 from 7.75% to 6.5% saves $370 a month and breaks even in 25 months on $9,000 of costs.
• But a new 30-year loan on 25 years left costs $11,838 more overall. A 25-year loan instead saves $63,109.
• Plan to keep the home and loan well past the break-even point.

What refinancing does

A new lender, or your current one, pays off the old mortgage with a new loan. You go through an application, appraisal and closing again, and pay closing costs again. People refinance to:

• get a lower interest rate and payment;
• switch from an adjustable rate to a fixed rate;
• shorten the term and pay the home off sooner;
• take cash out of their equity;
• remove a co-borrower, or drop FHA mortgage insurance.

A worked example

The saving pays back the closing costs in just over two years, which looks good. Yet over the life of the loans you pay $691,633 with the refinance (including the $9,000) against $679,796 by keeping your loan. The reason is the extra five years of payments.

The break-even point

The break-even point is the month when the savings have repaid the closing costs. If you sell or refinance again before then, you lose money. Rules of thumb such as “refinance when rates fall 1%” are rough; the break-even month answers the real question: will you keep this loan long enough?

The calculator uses closing costs ÷ monthly saving. It counts costs whether you pay them in cash or roll them in, because rolled-in costs are still repaid.

The 30-year reset trap

A lower payment often comes from spreading the balance over a longer term, not just from the lower rate. Starting a new 30-year loan five years into your old one means 35 years of payments in all.

The calculator warns you when a refinance lowers the payment but raises the total cost.

Keeping your payoff date

You can get both a low required payment and a low total cost. Take the 30-year loan at 6.5%, but pay $2,026 a month, the payment for a 25-year loan. The loan is then paid off in exactly 300 months with $307,686 of interest, the same as a 25-year loan, while you keep the right to drop back to $1,896 if money is tight.

How big a rate drop is worth it

A drop of half a point can still save money overall if you keep the term and stay for years, though break-even takes almost eight years. A bigger drop pays back faster and survives a longer term.

Closing costs

Freddie Mac says to expect refinance closing costs of about 3% to 6% of the loan: on $300,000, $9,000 to $18,000. They include the application and origination fees, appraisal, title search and insurance, recording fees, and any points. Some lenders offer a “no-closing-cost” refinance, which means a higher rate or costs added to the loan; the costs are still there.

Ask your current lender too. It may waive some fees to keep you, and a title company may give a reissue discount if your title policy is recent.

Rolling costs into the loan

Rolling the $9,000 into a 25-year loan at 6.5% makes the new loan $309,000 and the payment $2,086. The saving falls to $180 a month, the break-even moves out to 51 months, and the lifetime saving drops from $63,109 to $53,879, because you pay interest on the costs for 25 years.

Paying points

A discount point costs 1% of the loan and lowers the rate. If paying $3,000 more in costs (one point on $300,000) cut the rate in the example from 6.5% to 6.25% on a 25-year loan, the saving would rise to $287 a month and break-even would be 42 months on the $12,000 total. Points are worth it only if you will keep the loan for many years. Compare offers on APR, which includes points and fees.

Cash-out refinancing

A cash-out refinance borrows more than you owe and pays you the difference, often to pay for renovations or to clear higher-rate debt. Lenders usually cap the new loan at about 80% of the home’s value.

Taking $40,000 out in the example with a 30-year loan at 6.5% gives a payment of $2,149, still $117below today’s, but after counting the cash you receive the refinance costs $62,855 more over its life. Using home equity to pay off a credit card turns unsecured debt into debt secured on your home, and spreads it over decades. Our debt payoff calculator compares faster ways to clear debts.

Refinancing to a shorter term

Moving from a 30-year to a 15-year loan usually raises the payment but often comes with a lower rate and saves a lot of interest. If you can afford the higher payment comfortably, it is one of the surest ways to cut the total cost. If not, paying extra on a 30-year loan gets much of the same benefit with more flexibility; our mortgage calculator shows the effect of extra payments.

Rates in 2026

Freddie Mac’s weekly survey put the average 30-year fixed rate at about 7.3% and the 15-year at about 6.6% on October 1, 2026, higher than a year earlier. Refinancing pays only if your new rate is clearly below your current one, so homeowners who locked in lower rates in earlier years usually have no reason to refinance now. Those who bought at higher rates may find chances as rates move.

Dropping PMI or FHA insurance

On a conventional loan you do not need to refinance to remove PMI: you can ask your servicer once the balance reaches 80% of the original value, and it ends automatically at 78%. FHA mortgage insurance often lasts for the life of the loan, so FHA borrowers who now have 20% equity sometimes refinance into a conventional loan to drop it. Count that saving alongside any rate saving.

When not to refinance

• You plan to sell before the break-even month.
• The lower payment comes only from restarting a long term.
• Your credit score has fallen, so the rate offered is not much better.
• Your home’s value has fallen and you would need to bring cash to closing.
• You would turn short-term debt into 30-year debt without a plan to stop using credit.

How the process works

1. Check your credit and get quotes from three or more lenders on the same day.
2. Compare Loan Estimates: rate, APR, points and total closing costs.
3. Lock your rate, then provide income documents and order an appraisal.
4. You receive the Closing Disclosure at least three business days before closing: check it against the Loan Estimate.
5. When you refinance your main home with a new lender, federal law usually gives you three business days after closing to cancel (the right of rescission).

Using the calculator well

Enter your current balance, rate and the months left (your statement shows them). Enter the new rate, term and closing costs from a quote. Under More options, choose whether to roll the costs in and add any cash out. Check three results: the monthly saving, the break-even month and the lifetime difference. If the calculator warns about the reset trap, try a shorter term. For other loans, use our loan calculator.

Moving from an adjustable rate to a fixed rate

If you have an adjustable-rate mortgage (ARM), its rate is fixed only for an opening period, often five, seven or ten years, and then resets in line with a market index, within caps set in your loan documents. Refinancing into a fixed-rate loan before the first reset swaps that uncertainty for a known payment. It can make sense even when the fixed rate is a little higher than your current ARM rate, because you are paying for certainty.

To use the calculator for this, enter your current ARM rate and your best guess of the rate after the reset, and compare both against the fixed-rate offer. Your loan documents show the index, the margin added to it and the caps on each change.

How long you will keep the loan

The break-even month only helps if you compare it with how long you expect to keep the loan. People move for jobs, family and space more often than they expect, and many refinance again when rates fall. If there is a real chance you will move within three or four years, a refinance with a long break-even is a gamble.

On the other hand, if you plan to stay for decades and the rate drop is meaningful, even a refinance with a break-even of four or five years can save tens of thousands of dollars, as long as you keep the payoff date in view.

Streamline refinances

FHA and VA loans have simplified refinance programs: the FHA Streamline Refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL). They usually need less paperwork and often no appraisal, but they must lower your payment or move you to a more stable loan. Closing costs still apply and can often be rolled in, so check the break-even month the same way.

Taxes and refinancing

If you itemize deductions, mortgage interest on your home is generally deductible within IRS limits. A lower rate means less interest and so a smaller deduction, but you still come out ahead: a deduction only returns part of each dollar of interest. Points paid on a refinance are usually deducted over the life of the loan rather than all at once (IRS Publication 936). Most households take the standard deduction, so for them the tax side makes no difference. The calculator ignores tax effects.

Comparing lender offers

Every lender must give you a Loan Estimate within three business days of your application, in the same standard format, so offers are easy to line up. Compare the rate, the APR, the points in section A, and the total closing costs. A lower rate with high points can be worse than a slightly higher rate with no points if you might move or refinance again within a few years.

Get estimates on the same day if you can, because rates move daily. Ask each lender whether the rate is locked and for how long, and what happens if closing is delayed. Then run each offer through the calculator: the one with the best break-even and lifetime figures for the time you expect to keep the loan is usually the one to pick.

Key numbers