Refinance Calculator
Should you refinance? Calculate the break-even point where refinancing costs are recovered by lower monthly payments.
Refinancing $200,000 from 7% to 5.5% over 25 years lowers the payment by $185 a month and repays the $3,000 cost in 17 months, saving $52,615 in interest over the remaining term.
Calculator
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How This Calculator Works
Refinancing makes sense when the savings from a lower rate exceed the closing costs. The break-even point is when cumulative monthly savings equal the refinance cost.
Worked example
Using the defaults — a $200,000 balance moving from 7% to 5.5% over 25 remaining years, with $3,000 of refinancing costs:
Price the old loan. $200,000 at 7% over 300 months is $1,414 a month. Total interest if you never refinance: $224,068.
Price the new loan. The same balance at 5.5% over the same 300 months is $1,228. Total interest: $168,452.
Find the monthly saving. $1,414 − $1,228 = $185 a month. This is the cash-flow improvement, and it is what most borrowers focus on.
Find the break-even. $3,000 ÷ $185 = 17 months. Sell or refinance again inside those 17 months and the refinance was a net loss. Stay past it and the whole remaining saving is real: $185 × 300 − $3,000 = $52,615.
Enter 200000, 7, 5.5, 25 and 3000 above to reproduce the 17-month break-even. The model assumes the same remaining term, which is the only honest comparison; resetting to a fresh 30 years would lower the payment further while raising the total cost.
The same refinance over different remaining terms
The break-even moves with the monthly saving. A longer remaining term means a bigger monthly difference and a faster payback.
| Remaining term | Old payment | New payment | Monthly saving | Break-even | Interest saved |
|---|---|---|---|---|---|
| 15 years | $1,798 | $1,634 | $164 | 19 mo | $26,520 |
| 20 years | $1,551 | $1,376 | $175 | 18 mo | $39,000 |
| 25 years (default) | $1,414 | $1,228 | $185 | 17 mo | $52,615 |
| 30 years | $1,331 | $1,136 | $195 | 16 mo | $67,500 |
Monthly figures are the amortised payment on the remaining balance. Interest saved is (monthly saving × months) minus the $3,000 cost. A shorter remaining term produces a smaller total saving because there are fewer months in which to collect it.
Common mistakes with this calculation
- Comparing payments instead of total cost. Restarting the clock at 30 years always lowers the payment, because you stretch the repayment over more months. A refinance that drops the payment while adding years can raise the total interest bill. Compare the total cost of each path, not the monthly figure.
- Rolling the closing costs into the loan. Financing the $3,000 adds it to the balance and charges interest on it for the whole term. At 5.5% over 25 years that $3,000 becomes about $5,700 of repayment. Pay the costs in cash if you can.
- Refinancing for a rate reduction that approximates the costs. A rule of thumb is that a refinance needs roughly a 0.75 to 1 percentage-point reduction to be worth the friction. Below that, the break-even stretches far enough that a move, a job change, or another refinance will wipe out the gain.
- Forgetting that the clock resets on the amortisation curve. If you were 20 years into a 30-year loan, most of your early payments were interest. Refinancing a 10-year remaining balance over a new 30-year term puts you back at the start of the curve, where almost every payment is interest again.
When this calculator does not apply
- The calculator assumes the new loan carries the same remaining term as the old one. Real offers often come with a different term, which changes both the payment and the total cost.
- Closing costs vary widely — appraisal, title, origination, points, recording — and are entered as a single figure here.
- It does not model the tax treatment of points, which may be deductible over the life of the loan.
- It assumes a fixed rate on both loans. Refinancing a fixed loan into an adjustable one carries reset risk the model does not represent.
- It ignores the time cost of the process itself and any lender credits that trade a higher rate for lower upfront costs.
Frequently Asked Questions
When should I refinance?
Generally, if you can lower your rate by 0.5-1% or more, plan to stay in the home past the break-even point, and can afford the closing costs, refinancing is worth considering.
What are typical refinance costs?
Refinancing typically costs 2-5% of the loan amount in closing costs, including appraisal, title search, origination fees, and points.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full formula derivation.
- Loan Options and Mortgage Costs Consumer Financial Protection Bureau
- Consumer Handbook on Adjustable-Rate Mortgages Consumer Financial Protection Bureau
- Mortgage Interest Deduction Internal Revenue Service
- Housing Finance Data Federal Reserve
- Owning a Home — Loan Estimate Explainer Consumer Financial Protection Bureau
Last reviewed .
Key takeaways
- A $200,000 refinance from 7% to 5.5% saves $185 a month and repays its $3,000 cost in 17 months.
- Total interest saved on the default case is $52,615 over the remaining 25 years.
- Never compare refinance offers by monthly payment alone — compare total cost.
- Rolling closing costs into the loan adds interest for the full term. Pay them in cash.
- A break-even shorter than the time you expect to stay in the home is the whole test.