Compare your current mortgage against a new refinance offer to see your monthly savings, break-even point, and total interest savings.
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The break-even point is calculated as: Closing Costs ÷ Monthly Savings, giving the number of months it takes for your accumulated monthly savings to cover the cost of refinancing. If you plan to stay in the home shorter than this break-even period, refinancing may not be worthwhile despite a lower rate.
A lower interest rate doesn't automatically mean refinancing saves money overall, extending your loan term resets the amortization clock, potentially increasing total interest paid even at a lower rate. This calculator compares total remaining cost of your current loan against the new loan's total cost plus closing costs, giving a fuller picture than the rate alone.
For example, refinancing a $250,000 balance with 300 months (25 years) remaining at 7.5%, into a new 360-month (30-year) loan at 6.2%, with $4,000 in closing costs, drops the monthly payment from $1,847.48 to $1,531.17, a monthly savings of $316.31, and pays back the closing costs in 13 months. But because the term reset from 25 to 30 years, the total interest savings actually comes out to about −$979, a net loss overall, despite the lower rate and lower monthly payment. This is exactly the term-reset trap described above.
Judging a refinance purely by the drop in monthly payment, as the worked example above shows, a lower monthly payment can still come with a net total-cost loss if the term resets to a longer period.
Not entering closing costs, or underestimating them, appraisal, origination, and title fees add up and directly extend the break-even period.
Ignoring how long you plan to stay in the home, if you'll move or sell before the break-even month, refinancing likely isn't worth it even with a positive monthly savings figure.
A negative monthly savings means the new loan actually costs more per month than your current one, refinancing likely isn't beneficial in that scenario despite a lower rate, often due to a shorter new term.
Enter your total estimated closing costs, including any appraisal, origination, or other fees your lender quotes, as a single combined number in the closing costs field.
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