About this calculator
Refinancing replaces your current loan with a new one, usually to get a lower rate. The catch is that the new loan is not free — closing costs typically run 2%–5% of the loan amount — and restarting the clock can quietly add years of payments. This calculator puts the three numbers that matter side by side: how much the monthly payment drops, how many months it takes for those savings to repay the closing costs (the break-even point), and whether you actually save money over the full life of both loans.
The break-even point is the decision rule most people should use: if you expect to keep the new loan longer than the break-even period, refinancing usually pays off; if you might move or refinance again sooner, it usually does not.
How to use it
- Enter your remaining balance, current rate, and how many years are left on your current loan.
- Enter the new loan's rate and term, plus realistic closing costs (your lender's loan estimate lists them).
- Check the break-even point against how long you realistically expect to keep this loan.
- Check lifetime savings too — a lower payment from stretching the term can still cost more overall.
The formula
Monthly savings is your current principal-and-interest payment minus the new one. Lifetime savings compares the total remaining cost of the current loan against the total cost of the new loan including closing costs — the number that exposes "lower payment, higher cost" refinances.
Worked example
You owe $280,000 at 7.5% with 25 years left: the payment is $2,069.18. Refinancing to 6.0% over 30 years drops it to $1,678.74, saving $390.43 a month. With $6,000 of closing costs you break even in about 15.4 months. Over the full terms you save $10,405.66 even after costs — although notice the new loan runs five years longer, which is exactly what the lifetime figure accounts for.
Sources: Standard amortization formula applied to both loans; closing costs as entered. Last updated: October 2026.
Frequently asked questions
When does refinancing make sense?
When three things line up: the new rate is meaningfully lower (a common rule of thumb is at least 0.75–1 percentage point), you will keep the loan past the break-even point, and the lifetime savings are positive. Run all three checks above with your real numbers rather than relying on the rule of thumb.
What are typical closing costs on a refinance?
Usually 2%–5% of the loan amount, covering appraisal, origination, title and recording fees. "No-closing-cost" refinances exist, but the costs are folded into a higher rate instead — compare the break-even either way.
Does refinancing hurt my credit?
Temporarily, a little: the application is a hard inquiry, and the new loan lowers your average account age. The effect is usually small and fades within months. Rate-shopping within a short window (about 14–45 days depending on the scoring model) counts as a single inquiry for mortgages.
Should I refinance into a shorter term?
If you can afford the payment, a shorter term (for example 30 years down to 15) usually carries a lower rate and saves dramatically more interest than refinancing into another 30-year loan. Compare both new-term options above.
What formula does this refinance calculator use?
Break-even (months) = Closing costs ÷ Monthly savings Monthly savings is your current principal-and-interest payment minus the new one. Lifetime savings compares the total remaining cost of the current loan against the total cost of the new loan including closing costs — the number that exposes "lower payment, higher cost" refinances. The worked example on this page applies the formula step by step with real numbers, so you can verify the result by hand.