How much does it cost to refinance?

Closing costs typically run 2–5% of the loan amount — on a $300,000 loan, that's $6,000–$15,000. These include lender origination fees, appraisal, title insurance, and prepaid items like escrow. 'No-cost' refinances roll fees into the loan balance or offset them with a higher rate — they're not free, just differently structured.

What is the break-even point and why does it matter?

The break-even is how many months until cumulative monthly savings equal your upfront closing costs. If closing costs are $5,000 and you save $200/month, break-even is 25 months. If you sell or refinance again before that, you've netted a loss. If you stay beyond it, every month beyond break-even is net savings.

Is a 15-year refinance better than a 30-year?

A 15-year typically offers a lower rate (often 0.5–0.75% less than 30-year) and builds equity much faster, but has a significantly higher monthly payment. If you can afford the payment, a 15-year saves dramatically on total interest. If the payment would strain your budget, a 30-year with deliberate extra payments gives flexibility — you can pay more when able but aren't locked in.

How much rate drop makes refinancing worth it?

The old '1% rule' is too simple. What matters is your specific break-even given closing costs and expected time in the home. A 0.5% drop with low closing costs and a long runway can be worth it. A 1.5% drop with high closing costs and plans to sell in 2 years might not be. Always run the actual numbers.

What is a cash-out refinance?

A cash-out refinance replaces your existing mortgage with a larger loan, giving you the difference in cash. Example: $200,000 remaining balance, you refinance for $250,000 and pocket $50,000. The cash-out amount increases your loan balance and extends how long you're paying interest. It can make sense for home improvements that increase home value, but it's not free money — you're borrowing against your home equity.

⚖️Comparisons

Mortgage Refinance Calculator – Is It Worth It?

Is refinancing worth it?

What This Does

Refinancing sounds simple: swap your old mortgage for a new one at a lower rate and save money. But the full picture is more complicated. Refinancing costs money upfront — typically 2–5% of the loan in closing costs. Whether those costs are worth paying depends entirely on how long you'll stay, how much your rate drops, and whether resetting to a longer term actually saves you money or just lowers your payment while costing you more overall. This calculator models all of it. Enter your remaining balance, current rate, and months left on your loan. Then enter the new rate, new term, and closing costs. You'll see the break-even point (months until savings offset closing costs), your monthly payment change, total interest under each scenario, and a clear yes/no on whether refinancing makes sense given your numbers. The key insight most people miss: if you're 10 years into a 30-year mortgage and refinance into another 30-year loan, you've extended your debt by 10 years. Even at a lower rate, resetting to a longer term can cost you more in total interest. This calculator surfaces that comparison directly. The most common good refinance is shortening the term, not just lowering the rate.

Assumptions

·Closing costs are paid out of pocket (not rolled into the new loan) — rolling in costs changes the break-even calculation
·You stay in the home for the duration of the comparison period
·The new rate is fixed for the full new term
·No prepayment penalty on the existing loan

How It's Calculated

Monthly payment (both loans): M = P × [r(1+r)^n] / [(1+r)^n – 1] Break-even in months = Closing costs ÷ Monthly payment savings Total interest (old loan, remaining term) = (Old monthly payment × months remaining) – remaining balance Total interest (new loan) = (New monthly payment × new term months) – remaining balance Net savings from refinancing = Total interest old – Total interest new – Closing costs A positive net savings means refinancing saves money overall. If break-even months > your expected time in home, refinancing costs you money regardless of the lower rate.

When Should You Use This?

→When mortgage rates have dropped 0.75%+ below your current rate
→Evaluating a no-cost refinance offer from your lender
→Deciding between a 15-year, 20-year, or 30-year refinance option
→Comparing multiple lender offers with different rates and closing costs
→Considering refinancing to pull out equity (cash-out refi) — model the impact on total interest

Worked Examples

Example 1: Rate drop, same term — does it pencil?

Inputs: Remaining balance: $290,000 · Current rate: 7.25% · Months remaining: 264 (22 yrs) · New rate: 6.25% · New term: 30 yr · Closing costs: $6,000

Result: Monthly savings: $210 · Break-even: 29 months · But: new 30-yr term adds 8 years of payments · Total interest old: $219,000 · Total interest new: $207,000 · Net savings: $6,000

The rate drop saves $210/month and $6,000 total after closing costs — but only if you stay 29+ months. Resetting to 30 years adds 8 years of payments; the savings are real but modest. Consider a 20-year refinance instead.

Example 2: Shorter term refinance — much bigger savings

Inputs: Same balance and current rate · New rate: 6.25% · New term: 20 yr · Closing costs: $6,000

Result: Monthly payment change: +$65 · Break-even: N/A (payment slightly higher) · Total interest saved vs. keeping old loan: $54,000 · Payoff 2 years earlier

A slightly higher monthly payment on a 20-year refinance saves $54,000 in total interest and pays off the home 2 years earlier than the remaining 22-year term. This is typically the best refinance outcome: lower rate + shorter term.

🏠 Mortgage Refinance Calculator

Monthly Savings · Break-Even · Rate Sensitivity · Stay Duration Analysis

Results update in real time. Model factors in closing costs, term extension, rate drop magnitude, and how long you plan to stay.

🏠 Current Loan

Remaining Balance

Current Rate

Months Remaining

30yr=360 · 27yr=324 · 20yr=240

🔄 New Loan Terms

New Rate

New Term

yrs

Closing Costs

Typical: 2–5% of balance

Roll into Loan?

📍 Your Situation

Discount Points

1 point = 1% of loan

Cost per Point

Monthly Gross Income

Years You Plan to Stay

yrs

About This Calculator

This refinance calculator computes monthly savings, break-even, and net benefit from 11 inputs in real time via useEffect. Core formula: calcMonthly(P,r,n) = P × (r/12) / (1 − (1+r/12)^−n). currentPayment = calcMonthly(balance, currentRate, currentMonthsLeft). newBalance = balance + closingCosts (if rolled). newPayment = calcMonthly(newBalance, newRate, newTermMonths). monthlySavings = currentPayment − newPayment. totalUpfront = closingCosts (if not rolled) + points × pointCostPct × balance. breakEvenMonths = totalUpfront / monthlySavings. netBenefit = monthlySavings × planYears × 12 − totalUpfront. Score weights: rateDiff (35pts), breakEvenVsStay ratio (30pts), monthlySavings magnitude (20pts), paymentToIncome (15pts).

Comparison tab: AreaChart with two series — cumulative savings (emerald, gradient fill) and net benefit after costs (accent color) — across years 0 to term length, with ReferenceLine at 0 (break-even line), vertical ReferenceLine at break-even year, and your stay plan marker. Side-by-side current vs refinanced loan details. Rates tab: BarChart of monthly savings at 6 rate scenarios (current rate ±0.5% to −2%), green = savings, red = costs increase, current rate highlighted, plus detail table with break-even and score per rate. Stay Duration tab: BarChart of net benefit at 9 stay durations (1–30yr), green = profitable, red = still in the hole, your plan highlighted, plus detail table with worthwhile/not column.

Educational model only. Not financial advice. Consult a mortgage professional. HUD counselor: 1-800-569-4287.

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Common Mistakes to Avoid

✕Only looking at monthly savings without calculating the break-even point — if you move or refinance again before break-even, you've lost money
✕Resetting to a 30-year term without realizing you're extending total debt duration, which often offsets the rate savings
✕Rolling closing costs into the new loan balance without accounting for the interest you'll pay on those costs
✕Refinancing multiple times in a short period — each refinance resets your amortization and closing costs pile up
✕Assuming 'no-cost' refinancing is actually free — the costs are either rolled into the balance or offset with a higher rate

Frequently Asked Questions