About Refinancing
Refinancing swaps your loan for a new one at today's terms — worth real money when rates have fallen since you borrowed, worth nothing (or less) once fees and a reset clock enter. The old '1% rule' (refi when rates drop a point) is a decent instinct that this calculator replaces with your actual numbers.
Enter the remaining balance, your current P&I payment (the principal-and-interest line, not the escrow-loaded total), the offered rate and term, and the quoted closing costs. You get the savings, the break-even month, and the total-cost line that catches term-reset illusions.
Pricing a brand-new purchase loan instead? That's the Mortgage Calculator.
The Break-Even Math
Three steps, one verdict:
New payment = balance × r ÷ (1 − (1+r)⁻ⁿ) Savings = current P&I − new payment Break-even = closing costs ÷ savings (months)
Worked example: $250,000 remaining, currently paying $1,520 — refinanced to 5.5% for 30 years pays $1,419.47, saving $100.53/month; $4,000 of closing costs breaks even in 40 months. Stay 5+ years and it's ~$2,000 ahead; sell in year two and it lost money.
Rate Drop vs Savings
Monthly savings on a $250,000 balance refinanced to 30 years, by new rate (vs a $1,520 current payment):
| New rate | New payment | Monthly savings | Break-even on $4k costs |
|---|---|---|---|
| 6.0% | $1,499 | $21 | 190 months — don't |
| 5.5% | $1,419 | $101 | 40 months |
| 5.0% | $1,342 | $178 | 23 months |
| 4.5% | $1,267 | $253 | 16 months |
The first row is the honest warning: small rate drops produce break-evens longer than most people keep a mortgage — the fee tail wags the rate dog.
When Refinancing Wins (and Loses)
Wins: meaningful rate drops (the table's bottom rows), killing PMI after equity growth, escaping an adjustable rate before it adjusts, and term-SHORTENING refis (25 years left → new 15) that raise the payment but slash lifetime interest. Cash-out refinancing is a different animal — you're borrowing more, and the 'savings' framing doesn't apply.
Loses: refinancing shortly before selling (break-even math is merciless), serial term resets (three refis into fresh 30-year clocks can leave you paying interest for four decades), and 'no-closing-cost' offers that bury the fee in a higher rate — run THAT rate through this calculator and the costs reappear. Match the new term to your remaining years to compare rate against rate honestly.