Mortgage Refinance Calculator
Calculate if refinancing your mortgage makes financial sense. See your monthly savings, break-even point, and total savings over the life of the loan.
Current Mortgage
25.0 years
New Mortgage
When Should You Refinance Your Mortgage?
Refinancing your mortgage can save you thousands of dollars, but it's not always the right move. Use our refinance calculator to determine if refinancing makes financial sense for your situation. The key is understanding your break-even point—the time it takes for your monthly savings to equal your closing costs.
Good Reasons to Refinance
Lower Interest Rate
If rates have dropped by at least 0.5-1% since you got your mortgage, refinancing could save you significant money over the life of the loan.
Shorten Loan Term
Refinancing from a 30-year to a 15-year mortgage can save you tens of thousands in interest, though your monthly payment will be higher.
Switch Loan Type
Converting from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage can provide payment stability and protect you from rising rates.
Remove PMI
If your home value has increased and you now have 20% equity, refinancing can eliminate private mortgage insurance (PMI) payments.
Cash-Out Refinance
Tap into your home equity to pay off high-interest debt, fund home improvements, or cover major expenses. Be cautious—you're increasing your loan balance.
Understanding the Break-Even Point
The break-even point is crucial when deciding whether to refinance. Here's how it works:
Example Calculation:
- • Closing costs: $5,000
- • Monthly savings: $200
- • Break-even point: $5,000 ÷ $200 = 25 months
If you plan to stay in your home for more than 25 months (2.1 years), refinancing makes financial sense. If you might move or sell sooner, you won't recoup your closing costs.
Refinancing Costs to Consider
Refinancing isn't free. Typical closing costs include:
- •Application Fee: $75-$300
- •Origination Fee: 0.5-1% of loan amount
- •Appraisal: $300-$500
- •Title Search and Insurance: $700-$900
- •Credit Report: $25-$50
- •Attorney Fees: $500-$1,000 (in some states)
Total closing costs typically range from 2-5% of the loan amount. On a $400,000 loan, expect to pay $8,000-$20,000.
Frequently Asked Questions
When should I refinance my mortgage?
Consider refinancing when interest rates drop by at least 0.5-1%, you can reduce your loan term without significantly increasing your payment, you want to switch from an adjustable-rate to a fixed-rate mortgage, or you need to tap into home equity. Calculate your break-even point to ensure refinancing makes financial sense.
What is the break-even point for refinancing?
The break-even point is when your monthly savings equal your closing costs. For example, if closing costs are $5,000 and you save $200/month, your break-even point is 25 months. If you plan to stay in your home longer than the break-even period, refinancing likely makes sense.
How much does it cost to refinance a mortgage?
Refinancing typically costs 2-5% of the loan amount in closing costs. This includes application fees, appraisal, title search, and other lender fees. On a $400,000 loan, expect to pay $8,000-$20,000 in closing costs. Some lenders offer no-closing-cost refinances, but these usually come with higher interest rates.
Should I refinance to a shorter loan term?
Refinancing to a shorter term (e.g., 30-year to 15-year) can save you tens of thousands in interest, but increases your monthly payment. It's a good option if you can afford the higher payment and want to build equity faster and pay off your home sooner.