When does it make sense to refinance?

Refinancing typically makes sense when you can lower your interest rate by at least 0.5-1%, plan to stay in the home long enough to recoup closing costs (past the break-even point), or need to change your loan term. If your break-even period is 2-3 years and you plan to stay 5+ years, refinancing is likely worthwhile.

What is the break-even point for refinancing?

The break-even point is the number of months it takes for your monthly savings to equal the closing costs of refinancing. Calculate it by dividing your total closing costs by your monthly payment savings. If closing costs are $4,000 and you save $200/month, your break-even is 20 months.

What are typical refinance closing costs?

Closing costs for refinancing typically range from 2-5% of the loan amount, or $3,000-$10,000 on average. They include appraisal fees, title insurance, origination fees, credit report fees, and recording fees. Some lenders offer no-closing-cost refinances with a slightly higher interest rate.

Should I refinance to a shorter term?

Refinancing from a 30-year to a 15-year mortgage increases your monthly payment but significantly reduces total interest paid and builds equity faster. This is a good option if you can comfortably afford the higher payment and want to pay off your home sooner.

Free Refinance Calculator — Should You Refinance?

Refinance Calculator

Compare your current mortgage to a refinanced loan and see if refinancing saves you money.

Current Loan

Current Loan Balance ($)

Current Rate (% p.a.)

Remaining Term (Years)

New Loan

New Rate (% p.a.)

New Term (Years)

Closing Costs ($)

Monthly Savings

Current Monthly Payment $0 New Monthly Payment $0 Break-Even Period -- months

Total Interest Saved

Net Savings

Current Total Interest $0 New Total Interest $0

Should You Refinance Your Mortgage?

Refinancing replaces your current mortgage with a new loan, ideally at a lower interest rate or better terms. The primary goal is to reduce your monthly payment, lower the total interest paid over the life of the loan, or switch from an adjustable-rate to a fixed-rate mortgage for payment stability.

The Break-Even Calculation

The most important number in refinancing is the break-even period. This tells you how many months of savings it takes to recoup the closing costs of refinancing. Simply divide your closing costs by the monthly payment savings. If you plan to stay in your home past the break-even point, refinancing is financially beneficial.

Rate vs. Term Refinancing

A rate-and-term refinance changes your interest rate and possibly loan term without increasing the loan balance. This is the most common type. A cash-out refinance lets you borrow more than you owe and take the difference in cash, but it increases your loan balance and monthly payment.

Consider refinancing when rates drop at least 0.5 to 1 percentage point below your current rate, when you want to switch from an adjustable to a fixed rate, or when you want to shorten your loan term to build equity faster. Always factor in closing costs to ensure the savings justify the expense.

This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for decisions specific to your situation.