Refinance Calculator
See your new payment, exactly how many months until closing costs pay for themselves, and the real lifetime interest impact.
Current vs. new loan
Monthly Savings
$336/mo
Break even in 15 months
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Last updated: August 5, 2026 · Reviewed by the DoCalc team
What Is a Refinance Calculator?
Refinancing replaces your current mortgage with a new one — usually to get a lower rate, but it isn't automatically a win: you pay closing costs upfront in exchange for a lower payment or less interest over time. This calculator shows exactly how many months it takes for the monthly savings to cover those closing costs, plus the real lifetime interest comparison between your current loan and the new one.
The Formula
Both payments are calculated with the standard loan amortization formula — the current payment on your remaining balance, rate, and remaining term; the new payment on the same balance at the new rate and term.
Worked Example
$320,000 balance, currently at 7.5% with 27 years remaining, refinancing to 6.25% over a fresh 30-year term, $5,000 closing costs:
Despite resetting to a full 30-year term, the meaningful rate drop (7.5% → 6.25%) actually reduces total lifetime interest here by roughly $38,000 — the rate drop outweighs the three extra years added back onto the loan. That's not automatic in every scenario, which is exactly why it's worth running your specific numbers rather than assuming.
Break-Even Rule of Thumb
| Your situation | Refinance likely worth it? |
|---|---|
| Staying well past the break-even point | Usually yes, on a cash-flow basis |
| Might move or sell before break-even | Probably not — you won't recoup the closing costs |
| Rate drop is very small | Run the numbers — savings may be marginal after costs |
Pros and Cons of Refinancing
Pros: lower monthly payment, potentially lower lifetime interest with a meaningful rate drop, option to switch loan types (e.g., adjustable to fixed).
Cons: upfront closing costs, resets the amortization schedule (more of each early payment goes to interest again), no benefit if you move before the break-even point.
Who Should Use This Calculator
Use it if you're evaluating whether a refinance offer is worth the closing costs, especially if you're unsure how long you'll stay in the home.
Also consider a shorter new term (e.g., matching your remaining years instead of resetting to 30) if minimizing total interest matters more to you than the lowest possible monthly payment.
Common Mistakes to Avoid
The most common mistake is focusing only on the lower monthly payment without checking the break-even point against how long you'll actually stay. A second mistake is assuming a lower rate always means less total interest — resetting the loan term can sometimes offset the savings from a small rate drop; always check the lifetime interest comparison, not just the payment. A third is rolling closing costs into the loan without realizing that extends your effective break-even point, since you're now financing those costs too.
Expert Recommendation
Get a real Loan Estimate from a lender for exact closing costs and rate, then run the numbers here with your actual figures. If you're not sure how long you'll stay, use a conservative (shorter) estimate — the refinance should still make sense even if your plans change.
Frequently Asked Questions
What is the break-even point on a refinance?
It's how many months of monthly savings it takes to recover the closing costs of refinancing. If you plan to stay in the home past the break-even point, the refinance is generally worth it on a cash-flow basis; if you'll move or sell before then, you likely won't recoup the costs.
Why would refinancing lower my total interest even with a new 30-year term?
A meaningfully lower interest rate can outweigh the effect of "resetting the clock" on your loan term — less of each payment goes to interest at a lower rate, which can offset or even beat the extra years of payments. It's not automatic though: run the actual numbers, since a small rate drop combined with a big term extension can sometimes increase total interest paid.
Does resetting my loan term always cost me more in total interest?
Not necessarily — it depends on the size of the rate drop versus how many years you're adding back. A large rate reduction can more than offset a term reset; a small rate reduction combined with restarting a 30-year clock might not. This calculator shows you the actual lifetime interest comparison so you're not guessing.
Should I roll closing costs into the new loan?
Rolling costs into the loan avoids an upfront cash outlay but means you're financing (and paying interest on) those costs for the life of the new loan — increasing the effective break-even point. Paying closing costs out of pocket, if you can, generally reaches break-even faster.
What's a typical closing cost for a refinance?
Refinance closing costs commonly run in the low thousands of dollars, though the exact amount varies by lender, loan size, and location — get a specific Loan Estimate from your lender rather than assuming a fixed percentage.
Is it worth refinancing for a small rate drop?
It depends on the loan balance, how long you'll stay, and the closing costs — a small rate drop on a large balance can still produce meaningful savings, while the same rate drop on a small balance or a short remaining stay may not clear the closing costs. Run your specific numbers rather than relying on a rule of thumb.
Conclusion
A refinance is a bet that you'll stay in the home long enough for the monthly savings to outweigh the upfront cost — and the break-even point is exactly where that bet pays off. Run your real numbers above before signing anything.