How much lower does the rate need to be before refinancing is worth it?

The old rule of one full percentage point ignores loan size. A 0.5% cut on a $600,000 balance saves far more than a 1% cut on $120,000. Use the break-even month instead: if you are confident of staying past it, the refinance works.

What is the break-even point on a refinance?

Total closing costs divided by the monthly saving. With $5,500 of costs and a $281 monthly saving, you break even at month 20. Before that month you are behind; after it, the refinance is paying you back every month you stay.

Why does the current payment shown not match my actual mortgage payment?

The calculator amortises the balance you enter over 30 years at your current rate, so it compares two fresh loans on equal footing. If you are part-way through an existing mortgage, your real payment differs. Compare the monthly saving figure rather than treating either payment as your statement amount.

Will refinancing reset my loan back to 30 years?

It will if you accept a 30-year term, which is what most lenders quote by default. You can ask for a term matching the years you have left, which captures the lower rate without pushing your payoff date further out.

Does this show the change in total interest?

No. It reports the monthly saving, break-even month, both payments, the costs to recoup, and the five-year net saving. Total lifetime interest depends on the term you choose, so use the amortisation calculator to compare the full interest cost of each option.

Does refinancing hurt my credit score?

A hard inquiry and a new account usually cause a small temporary dip of a few points. Scoring models generally treat multiple mortgage inquiries inside a short shopping window as a single event, so comparing lenders does not multiply the impact.

Can I refinance with little equity?

Conventional refinances generally want 20% equity to avoid mortgage insurance, while streamline programmes for FHA and VA loans allow much less. Below 20%, add the mortgage insurance premium to the new payment yourself before trusting the saving figure.

Is a cash-out refinance covered?

Not directly, since this compares like-for-like balances. You can enter the higher balance you intend to borrow and the payment will reflect it, but treat the cash you take out as separate borrowing rather than part of the saving.

Refinance Calculator

Calculate mortgage refinance savings online free — compare rates, break-even period and total interest. No upload required — instant, private, in-browser.

100% Private — Runs entirely in browserInstant calculation & resultFree, no sign-up

Is refinancing worth the closing costs?

Current loan balance ($)Current interest rate (%)New interest rate (%)New loan term (yrs)Refinance closing costs ($)

Monthly savings$280.98
Break-even period1 yr 8 mo
New monthly payment$1,833.77
Current monthly payment$2,114.75
Closing costs to recoup$5,500
5-year net savings after costs$11,359

Calculated in your browser — nothing you type is sent anywhere.

A refinance calculator works out whether a lower rate is worth the closing costs to get it. Enter your balance, your current rate, the new rate and term, and what the refinance will cost. The answer that matters is the break-even month: the point where the accumulated saving finally covers the fees.

The only number that decides a refinance

Refinancing replaces your existing mortgage with a new one and charges you to do it. The monthly saving is easy to see and easy to oversell; the fees are easy to forget because they are paid once. Dividing one by the other gives the honest answer. Stay in the house past the break-even month and the refinance paid for itself. Move, or refinance again, before it and you lost money — which is why the same deal can be excellent for someone settling down and a mistake for someone expecting a job relocation.

A worked example

Take a $310,000 balance at 7.25%, refinancing to 5.875% over 30 years with $5,500 of closing costs. The payment falls from $2,114.75 to $1,833.77, a saving of $280.98 a month. Divide $5,500 by that and you break even at month 20. Stay five years and you are roughly$11,359 ahead after costs. Change the closing costs to $9,000 and break-even moves to month 33, which is the sort of shift that turns an obvious yes into a maybe.

What the calculator reports, and what it does not

Read the outputs for what they are before acting on them.
Output	What it means
Monthly savings	Difference between the two payments below
Break-even period	Closing costs divided by that saving, rounded up
New monthly payment	Your balance at the new rate over the new term
Current monthly payment	Your balance at your current rate over 30 years
Closing costs to recoup	Simply the figure you entered, for reference
5-year net savings	Sixty months of saving, minus the closing costs
Total lifetime interest	Not shown — see the amortisation calculator

One assumption is worth stating plainly. Both payments are principal and interest on the balance you enter, and the current payment is amortised over 30 years rather than over the years you actually have left. That keeps the comparison like-for-like between two rates, but it means neither figure is your statement amount if you are part-way through a mortgage. Trust the saving and the break-even month; treat the two payments as a rate comparison rather than a forecast.

The trap hiding inside the monthly saving

A large share of the advertised saving in most refinances comes from stretching the term, not from the lower rate. If you have 27 years left and refinance into a fresh 30-year loan, the payment drops partly because you gave yourself three more years of payments. The arithmetic is unforgiving: $310,000 at 5.875% over 30 years costs about $350,000 in interest, while the same balance at the same rate over 20 years costs about$218,000. The 20-year payment is $2,198.64, higher than the 30-year figure and higher than the current payment in our example — yet it saves well over $100,000. A lower monthly payment and a cheaper loan are not the same thing.

Match the term where you can. Refinancing 27 remaining years into a 25 or 20-year loan captures the rate cut without resetting the clock.
Rolled-in costs are still costs. Financing the fees into the balance hides them and then charges you interest on them for decades.
Check the break-even against your plans, not against a general rule. Your expected time in the house is the real input.

What closing costs usually include

Budget roughly 2% to 5% of the loan amount: lender origination, appraisal, title search and title insurance, recording fees, credit report, and prepaid escrow. A "no-cost" refinance is not free — the lender absorbs the fees in exchange for a higher rate, which moves the cost into your payment where the break-even calculation can no longer see it. Ask for a Loan Estimate and enter the real total here.

Related calculators

To compare full interest costs across terms, the amortisation calculator prints the whole schedule. If you are weighing a refinance against simply overpaying your current loan, the mortgage payoff calculator answers that directly, and it is often the cheaper option. For a new purchase rather than a refinance, start with themortgage calculator or theaffordability calculator. All figures here are estimates for planning, not lending offers.

Frequently Asked Questions

How much lower does the rate need to be before refinancing is worth it?
The old rule of one full percentage point ignores loan size. A 0.5% cut on a $600,000 balance saves far more than a 1% cut on $120,000. Use the break-even month instead: if you are confident of staying past it, the refinance works.
What is the break-even point on a refinance?
Total closing costs divided by the monthly saving. With $5,500 of costs and a $281 monthly saving, you break even at month 20. Before that month you are behind; after it, the refinance is paying you back every month you stay.
Why does the current payment shown not match my actual mortgage payment?
The calculator amortises the balance you enter over 30 years at your current rate, so it compares two fresh loans on equal footing. If you are part-way through an existing mortgage, your real payment differs. Compare the monthly saving figure rather than treating either payment as your statement amount.
Will refinancing reset my loan back to 30 years?
It will if you accept a 30-year term, which is what most lenders quote by default. You can ask for a term matching the years you have left, which captures the lower rate without pushing your payoff date further out.
Does this show the change in total interest?
No. It reports the monthly saving, break-even month, both payments, the costs to recoup, and the five-year net saving. Total lifetime interest depends on the term you choose, so use the amortisation calculator to compare the full interest cost of each option.
Does refinancing hurt my credit score?
A hard inquiry and a new account usually cause a small temporary dip of a few points. Scoring models generally treat multiple mortgage inquiries inside a short shopping window as a single event, so comparing lenders does not multiply the impact.
Can I refinance with little equity?
Conventional refinances generally want 20% equity to avoid mortgage insurance, while streamline programmes for FHA and VA loans allow much less. Below 20%, add the mortgage insurance premium to the new payment yourself before trusting the saving figure.
Is a cash-out refinance covered?
Not directly, since this compares like-for-like balances. You can enter the higher balance you intend to borrow and the payment will reflect it, but treat the cash you take out as separate borrowing rather than part of the saving.