Mortgage Refinance Calculator

Example: from 7.25% to 6%

You owe $300,000 at 7.25% with 27 years left, so your principal-and-interest payment is $2,112.58. Refinancing into a new 30-year loan at 6% drops it to $1,798.65, saving $313.93 a month. With $6,000 of closing costs paid in cash, you break even after 20 months.

Total interest falls from about $384,477 on the old loan to $347,515 on the new one, even though the new loan runs three years longer. Choosing a term that matches your remaining 27 years would give a payment of $1,871.96 and save even more interest.

The break-even point

Break-even months = Closing costs ÷ Monthly savings

If you sell or refinance again before then, the refinance loses money. Rolling costs into the loan avoids paying cash but adds interest and slightly reduces the monthly savings.

Other reasons to refinance

• Shorten the term, for example to 15 years, to pay much less interest.
• Drop PMI once your home has gained value and you have 20% equity.
• Switch from an adjustable to a fixed rate for predictable payments.
• Cash-out refinance to borrow against your equity, usually at a higher rate than a rate-and-term refinance.

Frequently asked questions

When is it worth refinancing?

When you will stay in the home past the break-even point: closing costs divided by monthly savings. A common rule of thumb is that a rate drop of 0.75 to 1 point or more is worth checking.

How much does refinancing cost?

Closing costs typically run 2% to 5% of the loan amount for appraisal, title insurance, origination and recording fees. On a $300,000 loan, that is about $6,000 to $15,000.

Does a refinance restart my loan?

Usually, yes: a new 30-year loan restarts the clock, so even at a lower rate you might pay more interest overall. Choosing a term that matches your remaining years, or paying the old payment amount on the new loan, avoids that.

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