Refinance Calculator

Break-even: the number that decides it

Break-even months = closing costs ÷ monthly payment saving. On the first example on this page — refinancing $300,000 at 6.5% with 28 years left, down to 5.75% over 30 years — the payment falls about $190 a month, so $4,000 of costs repay themselves in roughly 21 months.

If you might sell, move or refinance again before that point, the lower payment never pays for itself and the closing costs are simply gone. The break-even is therefore a timeline against how long you expect to hold the new loan, not a verdict on the rate by itself.

After that point the deal flips in your favor: every month the new loan runs past the break-even, the lower payment is money kept rather than costs being repaid. That is why refinancing is really a holding-period question - a borrower staying five more years can justify costs a borrower leaving in one year never could.

Why a lower rate can still cost more

Restarting the clock is the hidden trap. Moving from 22 years remaining to a fresh 30-year term lowers the payment but stretches the balance over more months, so lifetime interest can rise even when the rate falls. The lower rate is pulling one way while the longer term pulls the other, and the payment drop hides which one is winning.

Compare a new term equal to your remaining term to isolate the effect of the rate, then test longer and shorter terms to see the trade-off in payments and total interest. Because the page prices both the monthly payment and the lifetime total, the term that feels cheapest in the moment is often the one that costs the most at the end.

Costs to include

Add origination fees, discount points, appraisal, title, recording and any lender fees to the closing costs field. Rolled-in costs (financed rather than paid at closing) still cost money because you pay interest on them; if a lender includes them in the new balance, add the amount to the balance field instead.

Leaving a cost out does not make the refinance cheaper - it just moves the true price into a field you are not reading. Discount points are the clearest example: each point prepays interest in exchange for a lower quoted rate, so an offer that assumes points is a different deal than one without them, and the cost belongs in the break-even as surely as the appraisal does.

The no-closing-cost refinance

A no-closing-cost offer usually means the lender covers the fees and charges you a higher rate instead. The closing cost drops to zero and the break-even point disappears, but the rate stays higher for the entire life of the new loan - so the “free” refinance is really a smaller monthly saving stretched over the whole repayment.

Turn off the trade purely by raising the new rate and setting the cost to zero: the calculator shows the true price of the free refinance — years of higher interest on the full balance. If you expect to stay in the loan a short time the no-cost offer can win; if you expect to stay for years, paying the costs at closing usually beats the higher rate.

What the comparison deliberately leaves out

Three things sit outside this arithmetic. The first is tax: mortgage interest is deductible for some filers, so a lower rate lowers the deduction too, and the after-tax saving is smaller than the number printed here. The second is escrow and insurance - property tax, homeowners and any mortgage insurance premium ride along with the payment but are not part of the loan comparison, which is why the table says it excludes them. The third is the cost of closing itself: the weeks of underwriting, the appraisal, and the risk that the rate you were quoted is not the rate you lock.

Nothing here models a cash-out refinance, a second mortgage or a change of loan type. If the new loan pays off other debt or drops mortgage insurance, those effects belong in a separate calculation: this page isolates the rate and the term, because that is the part a break-even can actually be computed for.