Refinance Break-Even Calculator
Find out whether refinancing is worth it. See your break-even point, monthly savings, and lifetime interest difference.
How break-even analysis works
Refinancing has upfront costs and ongoing savings. The break-even pointis how long it takes for the monthly savings to pay back the closing costs. If your break-even is 30 months and you plan to stay in the home for 5+ years, refinancing is a win. If you'll move in 2 years, the costs will outweigh the savings.
When refinancing is usually a good idea
Rates have dropped meaningfully since you got your loan (~0.5-1% or more), your credit has improved significantly, you want to convert from ARM to fixed, or you want to shorten your term and can handle the higher payment. It's almost always worth running the numbers every 18-24 months.
When to skip refinancing
You're likely to move within the break-even window, your loan is close to paid off (refinancing late in an amortization resets the interest-heavy early years), the rate improvement is under 0.25%, or you'd be stretching the term significantly and paying more in total interest despite the lower rate.
Rolling closing costs into the loan
Most lenders let you finance closing costs into the new loan balance. This preserves cash flow but means you're paying interest on those costs for the full term. On a 30-year loan, $6,000 in financed closing costs at 6% costs about $12,000 in total interest. Pay them upfront if you can; roll them in only if cash flow demands.
Shopping for the best refinance rate
Get Loan Estimates from at least 3-5 lenders on the same day (rates move daily). Compare APRs, not just interest rates — the APR includes lender fees and gives you the apples-to-apples cost. Current lender, credit union, online lenders, and a local broker will usually cover the market.
Frequently asked questions
How much lower does the new rate need to be to refinance?▾
The old rule of thumb (1% lower) is outdated. What matters is break-even time: divide closing costs by monthly savings. If you'll stay in the home past break-even, refinancing wins. A 0.5% rate drop on a large balance often makes sense, while a 1% drop on a small balance may not justify the closing costs.
What typical closing costs should I expect?▾
Mortgage refinance closing costs typically run 2-5% of the loan amount. For a $300,000 refinance, expect $6,000-$15,000. Costs include application fee, appraisal, title insurance, lender fees, and prepaid items. You can often roll these into the new loan, but that adds interest over time.
Should I restart a 30-year term or keep the years I've paid?▾
If you just want the lower monthly payment, a fresh 30-year term is fine. If you want to minimize total interest, choose a new term equal to your remaining years (e.g., if you have 22 years left, refinance to 20 years). You'll pay slightly more each month but save tens of thousands long term.
Can I refinance with bad credit?▾
Yes, but the rates get ugly quickly. Below 680 credit, many lenders won't offer competitive rates. Options: FHA Streamline Refinance (minimum documentation for existing FHA loans, often 580+ score), VA IRRRL (for VA loan holders), or focus on credit repair for 3-6 months first.
What's a 'no-closing-cost' refinance?▾
The closing costs aren't free — the lender rolls them into a slightly higher rate (typically 0.25-0.5% higher). This makes sense if you plan to move or refinance again within a few years. For a long-term hold, paying closing costs upfront and getting the lower rate usually saves more.
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