Refinance Break-Even Calculator

How to judge a refinance

A refinance replaces your current loan with a new one. It makes sense when the benefit, in payment or in total interest, is worth the cost and you keep the loan long enough to reach that point.

The break-even test

Divide the closing costs by the monthly saving. That is how many months it takes to recover the cost. If you expect to sell or refinance again before then, the refinance loses money.

Watch the term reset

Dropping the rate but restarting a 30-year clock can raise lifetime interest even though the payment falls. Compare total remaining interest, not only the payment, and consider matching your remaining term.

Rate-and-term versus cash-out

Rate-and-term changes the rate, the term, or both. Cash-out increases the balance and pays you the difference. Cash-out generally carries a higher rate and tighter equity requirements.

Costs you will see

Appraisal, title, lender fees, and prepaid interest and escrow. Some can be avoided with a lender credit, which raises the rate in exchange for lower upfront cost.

Frequently asked questions

When is a refinance worth it?

When the monthly savings recover the closing costs within the time you plan to keep the loan.

Does refinancing restart my loan?

A new 30-year term restarts the payoff clock. A shorter term can save interest.

How much lower does the rate need to be?

There is no fixed rule. The old one-percent guideline ignores loan size and closing cost. Run the break-even on your actual numbers instead.

Does refinancing hurt my credit?

The hard inquiry and the new account cause a small temporary dip. Rate shopping inside a short window is generally treated as a single inquiry.

How much equity do I need?

Often 20% for the best conventional pricing, though FHA, VA, and USDA streamline options can require considerably less.