Whether a refi is actually worth it: your new payment, what you save each month, and the exact month your closing costs pay for themselves.
Break-even is the number that decides this. Closing costs divided by monthly savings gives you the month the refi starts actually making you money. Sell or move before that month and you paid thousands in fees for nothing — don't refinance if there's a real chance you'll move before break-even.
Watch the interest stat too. A lower payment on a fresh 30-year term can still mean more total interest, because you reset the clock on a loan you'd already been chipping away at. If that number shows "extra" instead of "saved", the lower payment is stretched-out debt wearing a disguise.
Estimates are for education, not financial advice. Your lender's exact numbers may differ slightly.
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Refinancing replaces your current mortgage with a new one — ideally at a lower rate. The key question isn't just "is the new rate lower," it's how long until the savings pay for the cost of refinancing. That's the break-even point: closing costs ÷ monthly savings. If refinancing costs $6,000 and drops your payment by $250 a month, you break even in 24 months. Stay in the home past that point and the refinance is money ahead; sell or refinance again before it, and you've lost money on the deal.
Suppose you owe $320,000 at 7.5% and can refinance to 6.5%. Your principal-and-interest payment falls by roughly $215 a month. If closing costs run about $6,500, you break even in around 30 months — two and a half years. Planning to stay well beyond that? The refinance likely makes sense. One catch the calculator helps you see: refinancing into a fresh 30-year term can lower the payment while raising lifetime interest, because you're restarting the clock. Comparing total interest, not just the monthly payment, is the honest test.
Does refinancing reset my loan to 30 years?
It can, if you choose a new 30-year term. That lowers the monthly payment but stretches out interest. You can often refinance into a shorter term to avoid that — compare both above.
What do closing costs usually run?
Commonly about 2%–5% of the loan amount — appraisal, title, origination, and related fees. Some lenders offer "no-cost" refinances that fold the fees into a slightly higher rate.
When is refinancing not worth it?
When you'll move before the break-even point, when your credit or equity has slipped, or when the rate improvement is too small to overcome the fees.
What about cash-out refinancing?
That borrows against your equity for cash, raising your balance. It's a different decision from a rate-and-term refinance — judge it by what the cash is for and the new total cost.