About this calculator
A refinance replaces your existing mortgage with a new one at a different rate, term, or both. The two questions worth answering before you sign anything are: how long until the closing costs pay themselves back, and what's the lifetime savings compared to keeping the current loan. This calculator does both.
The break-even formula
Break-even (in months) = closing costs ÷ monthly savings. If closing costs are $6,000 and the new payment is $300 lower, you'd recoup the cost in 20 months. The right gate is straightforward: only refinance if you'll stay in the home longer than the break-even, ideally by a comfortable margin (3+ years).
When a refi makes sense
- Rate drop of 0.75%+ — the classic rule of thumb. Below that, closing costs eat most of the gain unless your balance is large.
- Term reset for cash flow — stretching back to 30 years drops the monthly even at the same rate, freeing up money. The cost: more total interest.
- Equity-tap (cash-out) — only if the use of proceeds beats the new rate (e.g. consolidating 22% credit card debt into a 7% mortgage).
Common refinance traps
Resetting a 30-year loan in year 8 means restarting the amortization clock — even with a lower rate, you may pay more total interest. "No-cost" refinances aren't free; the lender bakes the costs into a higher rate. And rate-and-term refinances rarely beat a strategic principal prepayment for borrowers near the end of their loan.