- Current monthly P&I—
- New monthly P&I—
- Monthly savings—
- Break-even point—
Should you actually refinance? Start with the break-even point
Refinancing sounds simple — get a lower rate, pay less each month. But the number that decides whether it's worth it isn't the rate, it's the break-even point: how many months of savings it takes to earn back what the refinance costs you upfront. This calculator shows that number, and it's the first thing you should look at.
Here's the logic in plain terms. Refinancing isn't free — you pay closing costs again, usually 2%–5% of the loan amount. On a $300,000 refinance that's roughly $6,000–$15,000. If your new rate saves you $200 a month, you divide the cost by the savings: $9,000 ÷ $200 = 45 months to break even. Stay in the home longer than that and you come out ahead. Sell or refinance again before then, and you actually lost money.
When refinancing usually makes sense
- Rates dropped meaningfully — the old rule of thumb was a 1% drop, but even 0.5%–0.75% can pay off on a large balance if you're staying put.
- You're keeping the house past break-even — this is the one that actually matters. Do the math above before anything else.
- You want to drop PMI — if your home value rose and you now have 20%+ equity, refinancing can remove mortgage insurance entirely.
- You're switching from an ARM to a fixed rate — trading uncertainty for a payment you can count on.
When to think twice
Refinancing resets your loan term. If you're 8 years into a 30-year mortgage and refinance into a fresh 30-year loan, you've added 8 years of payments back. A lower monthly payment can still mean more total interest over the life of the loan. Watch the "New total interest" figure above, not just the monthly number — that's where the real cost hides.
A quick sanity check: if you're refinancing mainly to lower the monthly payment because money is tight, that's valid — but know you may pay more overall. If you're refinancing to save money long-term, only the net-savings-after-costs number tells the truth.
Common questions
How much does it cost to refinance?
Typically 2%–5% of the loan amount in closing costs — appraisal, origination, title, and recording fees. Some lenders offer "no-cost" refinances, but those roll the cost into a higher rate, so you pay either way.
Does refinancing hurt my credit?
The hard inquiry causes a small, temporary dip. Rate-shopping multiple lenders within a ~45-day window counts as a single inquiry, so compare offers without extra damage.
Can I refinance with the same lender?
Yes, and it's worth asking — they may waive some fees to keep your business. But always compare at least two or three other quotes first so you know their offer is actually competitive.