How this calculator works
Refinancing swaps your current mortgage for a new one, usually to grab a lower rate. The appeal is a smaller monthly payment — but that payment cut isn't free. You pay closing costs up front, and if you refinance into a fresh 30-year loan, you reset the clock and could pay interest for more years than you had left. Whether refinancing actually saves you money depends on two questions this tool answers: how long until your monthly savings recoup the closing costs, and whether the new loan costs less over its entire life.
It computes your current payment over the years you have left, your new payment on the new terms, and the difference. The break-even point is when accumulated savings cover the closing costs — past it you're ahead, before it you've lost money on the deal. Then it checks lifetime interest both ways, and shows what refinancing into a term that matches your remaining years would do, which is the comparison most calculators quietly skip.
The method
Payments use standard amortization; the break-even is closing costs over the monthly saving:
The lifetime comparison adds closing costs to the new loan's interest and weighs it against the interest remaining on your current loan.
- New payment: moves from about $2,063 to $1,799 —
$265/month saved. - Break-even: $6,000 closing ÷ $265/mo ≈ 23 months — then you're ahead.
- Lifetime: over the full term this refinance saves roughly $15,000 after closing costs.
- The smarter move: matching your 27-year remaining term instead saves about $56,000 in lifetime interest.
When refinancing makes sense
The classic rule of thumb — refinance when you can drop your rate by about 0.75 to 1 percentage point — is a starting point, but your real test is the break-even versus how long you'll stay. If you might sell or refinance again before the break-even month, the closing costs never pay off. If you'll stay well beyond it, refinancing is usually worth it. To capture the lower rate and the most interest savings, refinance into a term close to the years you had left, or refinance to 30 years for the lower payment and then add extra toward principal yourself.
Frequently asked questions
What is the break-even point?
How long your monthly savings take to recoup the closing costs — closing costs ÷ monthly payment reduction. Stay past it and refinancing pays off; leave before it and it doesn't.
Does refinancing reset my term?
Usually yes. A new 30-year loan restarts the clock — lower payment, but potentially more total interest. Matching the term to your remaining years almost always saves more interest, at a slightly higher payment.
How much does refinancing cost?
Closing costs are typically 2–5% of the loan, covering lender fees, appraisal, and title. Lower costs mean a shorter break-even, so the deal pays off sooner.
Should I take a 30-year and pay extra instead?
Often a strong option: the lower required payment gives flexibility, and adding extra principal yourself captures the interest savings of a shorter term while keeping the option to pay less in a tight month.