Refinance Calculator

How to think about refinancing

The two numbers that matter: monthly savings and break-even month.

• Monthly savings = your old monthly P&I − your new monthly P&I. If this is negative, the new payment is higher than what you have now (which only makes sense for cash-out or term shortening).
• Break-even month = closing costs ÷ monthly savings. This is when you've recovered the upfront cost of refinancing. If you sell or refinance again before this point, you lose money on the deal.

Rule of thumb: A refinance usually makes sense when (1) you can drop your rate by at least 0.5–0.75%, (2) you'll stay in the home past the break-even point, and (3) the lifetime interest savings clear closing costs by a meaningful margin.

Be careful about these gotchas

• Resetting the clock. Refinancing a 25-year remaining loan into a fresh 30-year resets you to year 1 of amortization — meaning more of each payment goes to interest early on, even at the lower rate.
• Closing costs. Origination, title, appraisal, recording — typically 2–5% of the loan amount. "No cost refi" usually rolls fees into the rate.
• Cash-out limits. Most lenders cap cash-out refinances at 80% LTV (lower for FHA/VA cash-out).
• Tax impact. The mortgage interest deduction shrinks as your interest payments do — factor that into the lifetime savings number if you itemize.

For a full payment breakdown including taxes and insurance, see the Mortgage Calculator. For comparison with a HELOC or home equity loan, see the HELOC vs Home Equity Loan article.