Refinance Calculator
See if refinancing your mortgage actually saves you money once closing costs are paid for. Includes the break-even point, lifetime interest savings, and the "reset the clock" trap most refi calculators ignore.
Last updated: April 2026 · Rates from Freddie Mac PMMS, April 2 2026
Your current loan
New loan
Typical range: 2-5%. Default is 3%.
How the refinance break-even works
Refinancing is not free. You pay closing costs upfront (2% to 5% of the loan balance) in exchange for a lower monthly payment. The break-even point is the number of months it takes for the monthly savings to equal what you paid in closing costs. The math is simple:
Worked example. You owe $285,000 on a 7.5% mortgage with 25 years left. Refinancing to a new 30-year loan at 6.46% drops your monthly payment from $2,107 to $1,793 — a savings of $314 per month. Closing costs at 3% of the balance are $8,550. Break-even = $8,550 ÷ $314 = 27 months, or 2.3 years. If you plan to stay in the home longer than 2.3 years, refinancing wins.
But there is a catch the basic break-even hides. Going from 25 years left into a new 30-year loan extends your total payoff by 5 years. Even though the monthly payment drops, the lifetime interest can actually increase. Match the new term to your remaining years (or shorter) to capture both monthly savings and total interest savings. The calculator above flags this with a warning when it happens.
When refinancing makes sense (and when it doesn't)
Refinance
- Your current rate is 0.75%+ higher than today's rate
- You plan to stay in the home longer than the break-even
- You can match the new term to your remaining years (no clock reset)
- Your credit has improved 50+ points since your original loan
- You want to drop PMI (you have crossed 20% equity)
- You want to switch from ARM to fixed before the rate adjusts
Skip the refi
- Rate drop is under 0.5% and you would be paying full closing costs
- Break-even is longer than 5 years
- You might move within 3 years
- You are doing a cash-out refi for discretionary spending
- Resetting to a new 30-year would extend your payoff significantly
- Your current rate is already at or below today's market rate
Four real-world refinance scenarios
1. The 2024 buyer with a 7.5% rate
Jennifer locked in a $340,000 loan at 7.5% in October 2024 when rates spiked. Refinancing to today's 6.46% on a new 30-year drops her monthly P&I from $2,378 to $2,138 — saving $240/month. Closing costs at 3% are $10,200. Break-even: 43 months (3.5 years). She plans to stay 10+ years, so this refinance saves her about $86,000 over the life of the loan after paying back closing costs.
2. The clock-reset trap
Tom has been paying his original $300,000 loan for 8 years. Balance is now $258,000, rate is 6.875%, and he has 22 years left. He refinances to 6.46% on a new 30-year, dropping his payment by $145/month. Sounds great. But he just turned a 22-year payoff into a 30-year payoff. Total interest paid actually increases by about $18,000 over the life of the loan because of the 8 extra years. The fix: he should have asked for a 20-year term to keep his payoff date roughly where it was.
3. The "no closing cost" refinance
Priya does not want to pay closing costs out of pocket. Her lender offers her 6.71% instead of 6.46% (a 0.25% bump) in exchange for absorbing closing costs. On her $250,000 balance, this saves her $7,500 upfront but costs her $40/month forever. She plans to refinance again in 4 years anyway, so the higher rate only costs her $1,920 — far less than the $7,500 in closing costs she avoided. No-closing-cost wins.
4. The cash-out for credit card debt
Marcus has $35,000 in credit card debt at 22% APR ($642/month interest alone) and $200,000 in home equity. He does a cash-out refinance, pulling $35,000 to pay off the cards. His new rate is 6.71% (0.25% higher than rate-and-term). The cards stop bleeding $642/month in interest, replaced by roughly $235/month in mortgage interest on the same $35,000. Net monthly savings: about $400. The catch: he just secured unsecured debt with his house. If he runs the cards back up, he is in a worse position than he started.
Common mistakes when running a refinance calculator
1. Comparing P&I instead of total payment
If you currently have an escrow account and the new lender does too, the change in escrow can move your real monthly payment in unexpected ways. Compare apples to apples.
2. Ignoring the clock reset
The single biggest hidden cost in refinancing. Always check what happens to total interest, not just monthly payment.
3. Trusting a lender's "monthly savings" number
Lenders sometimes calculate savings against a longer term to make the number look bigger. Always do the math yourself.
4. Forgetting prepaid escrow at closing
You will fund a fresh escrow account at closing for taxes and insurance. This is real money that does not show up as a "closing cost" but you need it on hand.
5. Not shopping multiple lenders
Refinance rates vary 0.25%-0.5% between lenders on the same day. Three quotes minimum. Five is better.
Frequently asked questions
When does it make sense to refinance my mortgage?
The traditional rule of thumb is to refinance if you can drop your rate by at least 0.75%-1% AND you plan to stay in the home long enough to pass the break-even point. The break-even is closing costs divided by monthly savings. If your refi costs $7,500 and saves you $250/month, you break even in 30 months. Stay longer than that, you win. Move sooner, you lose money.
How much do refinance closing costs typically run?
Refinance closing costs run 2% to 5% of the loan balance — sometimes higher. On a $300,000 loan, expect $6,000 to $15,000 in closing costs. The fees include lender origination (0.5-1% of loan), appraisal ($500-$800), title insurance ($1,000-$2,000), recording fees, and prepaid escrow items. Lenders advertising "no closing costs" either roll the fees into the loan balance or charge a rate that is 0.125-0.25% higher.
What is the refinance break-even point?
It is the number of months it takes for your monthly savings to equal the closing costs you paid. Formula: Break-even months = Closing costs / Monthly savings. If you stay in the home longer than the break-even, you come out ahead. Most experts suggest refinancing only if your break-even is under 3 years and you plan to stay at least 2 years past that.
Is the "1% rule" for refinancing still valid in 2026?
The old rule said only refinance if you can drop your rate by at least 1%. In 2026 it is more flexible. Even a 0.5% drop can be worth it if you plan to stay in the home 5+ years, or if you can get a no-closing-cost refi. Smaller rate drops (0.25%-0.5%) almost never pencil out unless your loan balance is very large or you are pulling out cash for a much higher-rate debt.
What is the "reset the clock" trap?
When you refinance into a new 30-year loan, the amortization clock starts over. If you have already paid 8 years on your original 30-year and you refinance into another 30-year, you have just turned a 30-year mortgage into a 38-year one. Even with a lower monthly payment, you may pay more total interest. The fix: refinance into a term that matches what you have left. 22 years left? Ask for a 20-year or even 15-year loan instead of resetting to 30.
Should I do a cash-out refinance to consolidate credit card debt?
The math often works because credit card APRs are 20%+ and mortgage rates are 6-7%. But you are converting unsecured debt into debt secured by your house — meaning if you cannot pay, you can lose the home. Cash-out refinances also typically carry rates 0.25-0.375% higher than rate-and-term refinances. Run the numbers carefully and only do this if you have addressed the spending habits that created the credit card debt in the first place.
How much can I actually save refinancing right now?
Depends entirely on your current rate. If you locked in at 7.5% in 2023-2024 on a $300,000 loan, refinancing to 6.46% saves about $208/month and roughly $75,000 over the life of the loan. If you are already at 6.5%, refinancing to 6.46% saves about $8/month and never pays for itself. Run your specific numbers in the calculator above before getting quoted.
What credit score do I need to refinance?
Most lenders want a 620 minimum for a conventional refinance, with the best rates going to scores of 760+. A 50-point difference in credit score can mean 0.25%-0.5% on your rate, which on a $300,000 loan over 30 years is $15,000-$30,000 in interest. Pull your credit report a few months before applying to fix any errors first.
How long does refinancing take?
The full refinance process typically takes 30-45 days from application to closing. Streamlined refinances (FHA Streamline, VA IRRRL) can close in as little as 2-3 weeks because they skip the appraisal and most income documentation. Cash-out refinances usually take longest because they require a full appraisal and underwriting.
Can I refinance if I have less than 20% equity?
Yes, but you will pay PMI on the new loan if you stay below 20% equity. If your original loan had PMI and you have since crossed 20% equity (because of payments and home appreciation), refinancing is one of the cleanest ways to get rid of PMI permanently. Getting an updated appraisal that confirms your new LTV is below 80% is usually enough.
Does refinancing hurt my credit score?
Yes, but only temporarily and only by a few points. The hard inquiry from the application drops your score by 5-10 points, and opening a new account briefly lowers your average account age. Both effects fade within 6-12 months. Multiple refinance inquiries within 14-45 days count as one inquiry for credit scoring purposes, so shopping multiple lenders is fine.
What is the difference between rate-and-term and cash-out refinance?
Rate-and-term refinance just changes your interest rate, loan term, or both — your loan balance stays the same. Cash-out refinance replaces your existing loan with a larger one and gives you the difference in cash, drawn from your home equity. Cash-out rates are typically 0.25-0.375% higher and most lenders cap cash-out loans at 80% LTV.
Data sources: Freddie Mac PMMS April 2 2026; Bankrate refinance closing cost analysis; Quicken Loans break-even guide; Chase Home Lending refinance education.
Last updated: April 2026. Refinance rates change daily. The Freddie Mac average shown is a weekly benchmark and may differ from individual lender quotes.
Disclaimer: This calculator provides estimates for educational purposes only and is not financial advice. Actual loan terms depend on your credit profile, the lender, and the specific property. Consult a licensed mortgage professional before signing a new loan.