Mortgage Refinance Calculator
Monthly savings and break-even analysis
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When Does Refinancing Make Sense?
A refinance pays off once your monthly savings have covered the closing costs: break-even months = costs ÷ monthly savings. With the 30-year fixed at 6.95% (Freddie Mac, 17 September 2026), moving a $300,000 balance from 8% to 6.95% saves $215 a month and recovers $6,000 of costs in 28 months. Enter your loan, new rate and costs above to see your own break-even.
Refinancing replaces your existing mortgage with a new one, ideally at a lower rate or for a shorter term. The classic rule of thumb is to refinance if you can reduce your rate by at least 1%. But the real question is: how long will you stay in the home, and how does that compare to the break-even point?
Break-even point = Closing Costs / Monthly Savings. If closing costs are $5,500 and monthly savings are $200, you break even in 27.5 months. If you plan to stay at least 3+ years, refinancing likely makes sense. If you're selling in 18 months, it may not.
The 1% Rule
A commonly cited guideline: refinance if you can reduce your rate by at least 1%. It's a useful heuristic but oversimplified. A 0.5% rate reduction on a $500,000 balance saves more than a 1% reduction on a $150,000 balance. Always calculate your specific break-even and lifetime savings.
Rate-and-Term vs Cash-Out
Rate-and-term refinance: replaces your loan with a lower rate or different term, no cash extracted. Cash-out refinance: replaces loan with a larger one, difference paid to you in cash. Cash-out uses home equity for debt consolidation, renovations, or other needs. It resets your mortgage term and increases total debt: use carefully.
Closing Costs
Typical refinance closing costs: 2 to 5% of the loan amount. On a $280,000 loan: $5,600 to $14,000. Components: lender fees (origination, points, underwriting), title insurance, appraisal, escrow and recording fees, prepaid items. No-closing-cost refinances roll costs into the rate (higher rate) or loan balance. They make sense only if you plan to sell or refinance again within a few years.
When Not to Refinance
Skip refinancing if: you're near paying off the mortgage (you'd reset interest-heavy amortization), you plan to sell soon (won't recoup costs), your credit score dropped significantly (may not qualify for better rates), you're in financial distress (better solutions may exist), you'd extend the term significantly even at a lower rate (net interest could be higher over full new term).
Refinance Savings at Today's Rates
The 30-year fixed averaged 6.95% on 17 September 2026 in Freddie Mac's weekly survey, up from 6.26% a year earlier. Below: a $300,000 balance with 30 years left, refinanced into a new 30-year loan, with $6,000 of closing costs (2% of the loan).
| Current rate | Current payment | Save at 6.95% | Break-even | Save at 6.5% | Break-even |
|---|---|---|---|---|---|
| 7.50% | $2,098 | $112/mo | 54 months | $201/mo | 30 months |
| 7.75% | $2,149 | $163/mo | 37 months | $253/mo | 24 months |
| 8.00% | $2,201 | $215/mo | 28 months | $305/mo | 20 months |
| 8.50% | $2,307 | $321/mo | 19 months | $411/mo | 15 months |
At current rates, refinancing mainly helps loans taken out at 7.5% or more. A loan below about 7% would save too little to cover typical costs unless rates fall.
Break-Even Months by Cost and Savings
How long it takes monthly savings to repay the closing costs. If you expect to sell or refinance again before then, the refinance loses money.
| Closing costs | $100/mo saved | $150/mo | $200/mo | $300/mo | $400/mo |
|---|---|---|---|---|---|
| $4,000 | 40 | 27 | 20 | 14 | 10 |
| $6,000 | 60 | 40 | 30 | 20 | 15 |
| $8,000 | 80 | 54 | 40 | 27 | 20 |
| $10,000 | 100 | 67 | 50 | 34 | 25 |
The Term Reset Trap
A lower payment is not always a saving. Take a $250,000 balance at 7.5% with 25 years left: the payment is $1,847 and the remaining interest is $304,243.
| Option | Payment | Monthly change | Interest from here |
|---|---|---|---|
| Keep the loan | $1,847 | $0 | $304,243 |
| New 30-year at 6.95% | $1,655 | $192 less | $345,753 ($41,510 more) |
| New 25-year at 6.95% | $1,759 | $88 less | $277,695 ($26,548 less) |
The 30-year refinance frees up $192 a month but adds five years of payments and costs more interest overall, before closing costs. Matching the new term to the years you have left, or paying the old payment on the new loan, keeps the rate cut as a real saving. The loan amortization calculator shows the full schedule for either loan.
Method and sources. Payments use M = P × r(1+r)n ÷ ((1+r)n − 1); break-even = closing costs ÷ monthly savings, rounded up to whole months; interest is total payments minus the balance. All figures were computed with these formulas. Rates: Freddie Mac Primary Mortgage Market Survey, 30-year fixed, 17 September 2026. Closing costs are illustrative; your Loan Estimate lists the real ones. Estimates only, not a loan offer.
Calculations assume fixed-rate mortgages and current remaining balance. Actual savings depend on your specific loan terms, credit score, and lender. Consult a licensed mortgage professional before refinancing.
Frequently Asked Questions
Key questions: How much will you save per month? What are the closing costs? How long until you break even? How long do you plan to stay in the home? Break-even = Closing Costs / Monthly Savings. If break-even is 24 months and you plan to stay 5+ years, refinancing likely makes financial sense. Also consider: does refinancing restart a 30-year term (increasing lifetime interest even with a lower rate)?
Conventional refinance: typically 620+ minimum, but 740+ gets the best rates. FHA streamline refinance: 580+ (some lenders require 620). VA IRRRL (streamline): no credit check required in most cases. USDA streamline: 640+. Note: if your credit improved since you got your original mortgage, you may qualify for significantly better rates now. A 780+ score vs 660 score can be worth 0.5 to 0.75% in rate.
Typical total costs: 2 to 5% of the loan amount. On a $300,000 loan: $6,000 to $15,000. Major components: loan origination fee (0.5 to 1% of loan), title search and insurance ($700 to $1,500), appraisal ($400 to $700), government recording fees ($25 to $250), prepaid interest (days until first payment), escrow setup (property taxes and insurance). Ask lenders for a Loan Estimate to compare costs exactly.
A no-closing-cost refinance either adds closing costs to the loan balance (increasing what you owe) or gives you a slightly higher interest rate in exchange for the lender covering costs (lender credit). You're not avoiding costs: you're spreading them differently. Best for: people who plan to sell or refinance again within 3 to 5 years, or those who lack cash for closing. Worst for: long-term homeowners who plan to stay 10+ years (pay the costs upfront and save long-term).
Mortgage interest deduction: if you itemize, you can deduct interest on up to $750,000 of mortgage debt. Refinancing at a lower rate may reduce your deduction: but you're also paying less in interest, so net position is better. Points paid on a refinance are amortized over the loan term (not fully deductible in year 1, unlike purchase mortgage points). Cash-out refinance: interest on the cash-out portion may not be deductible if not used for home improvement.
30-year refinance: lower monthly payment, maximum flexibility, but more total interest. 15-year refinance: higher monthly payment, significantly less total interest, builds equity faster. 15-year rates are typically 0.5 to 0.75% lower than 30-year rates. Example: $300,000 at 6.25% for 30 years = $1,847/month, $365,000 total interest. At 5.75% for 15 years = $2,491/month, $148,000 total interest. The 15-year costs $644 more per month but saves $217,000 in interest.
There's no legal limit on how many times you can refinance. But consider: closing costs reset each time, lender inquiries affect credit score (slightly), and repeatedly resetting the amortization clock increases lifetime interest. Refinancing makes sense when rate reduction and break-even justify the costs. Some homeowners refinance every few years during declining rate environments and build substantial savings.
A cash-out refinance replaces your current mortgage with a larger loan and pays you the difference in cash. Example: $200,000 remaining balance, home value $350,000, cash-out to $280,000 = $80,000 cash to you. Uses: home renovation, debt consolidation, college tuition, investment. Considerations: you're borrowing against your home equity, which reduces your equity cushion. If home values fall, you could owe more than the home is worth. The cash-out amount is subject to tax-deductible interest only if used for home improvement.
Refinancing replaces your first mortgage entirely. A second mortgage (HELOC or home equity loan) is a separate loan on top of your existing first mortgage. Refinancing: one payment, potentially lower rate on your whole balance, resets term, closing costs 2 to 5%. HELOC/home equity loan: keeps existing first mortgage intact (good if you have a low rate), additional payment, typically higher rate than first mortgage, lower or no closing costs. If you have a 3% first mortgage and need cash, a HELOC is usually better than refinancing the whole loan at current rates.
Lenders typically require: last 2 years of W-2s and tax returns, last 2 months of pay stubs, last 2 to 3 months of bank statements, most recent mortgage statement, current homeowner's insurance, government ID. Self-employed: 2 years of business tax returns and possibly a year-to-date profit and loss statement. Process typically takes 30 to 60 days from application to closing. Get multiple quotes within a 14-day window: multiple hard inquiries for the same loan type count as one inquiry on your credit report.
The 30-year fixed averaged 6.95% on 17 September 2026 in Freddie Mac's Primary Mortgage Market Survey, compared with 6.26% a year earlier. Refinance quotes depend on your credit score, loan-to-value ratio and points, and cash-out refinances usually price higher, so get Loan Estimates from at least three lenders on the same day.
There is no fixed rule; what matters is the break-even. On a $300,000, 30-year loan, cutting the rate from 8% to 6.95% saves $215 a month and repays $6,000 of costs in 28 months, while cutting from 7.5% to 6.95% saves $112 and takes 54 months. If you will stay longer than the break-even, and the new term does not add years, the refinance is likely worth it.