Is Refinancing Worth It?
Refinancing replaces your current mortgage with a new loan — usually to get a lower rate, a different term, or both. It is not automatically a win: closing costs (typically 2–5% of the loan amount) mean you need to stay in the home long enough for the monthly savings to pay those costs back. This calculator computes exactly that break-even point.
Break-even (months) = Closing Costs ÷ Monthly Savings
Worked Example
A $280,000 balance at 7% with 27 years remaining currently costs about $1,926/month. Refinancing into a new 30-year loan at 6% costs about $1,679/month — a saving of $247/month. Against $4,000 in closing costs, the break-even point is 4,000 ÷ 247 ≈ 17 months. Stay longer than that and the refinance nets you real savings.
The Trade-Off of Resetting the Clock
Refinancing into a fresh 30-year term after already paying down several years of a 30-year mortgage extends how long you will be paying — even at a lower rate, total interest paid over the full loan life can end up higher if you reset the term. Matching or shortening your remaining term (e.g. refinancing 27 years remaining into a 20-year loan) avoids this trap, though it raises the monthly payment.
When Refinancing Usually Makes Sense
- The new rate is at least 0.5–1 percentage point lower than your current rate.
- You plan to stay in the home well beyond the break-even point.
- You are switching out of an adjustable-rate mortgage before a rate reset.
Estimate only — actual refinance offers include appraisal, title and lender fees that vary by lender and state.