When is refinancing worth it?

When you keep the loan past the breakeven month, the point where the accumulated monthly savings cover what the refinance cost. The old rule about needing a full percentage point of rate improvement is a poor guide; what matters is the size of your balance against the costs, and how long you stay. Enter both above and the calculator gives the exact month.

How do I calculate the refinance breakeven point?

Divide the total closing costs by the monthly payment saving. At $4,900 of costs and a $300 monthly saving, that is 17 months. Beyond that you are ahead; before it you are not. The calculator does this and also marks the month on the balance chart.

Does refinancing to a lower rate always save money?

No, and the term is usually why. Resetting a loan with 22 years left back to 30 lowers the payment even at a worse rate, and can raise total interest despite a better one. Set the new term equal to your remaining months to see the rate effect on its own, that is the honest comparison.

Should I roll the closing costs into the loan?

It removes the cash outlay but not the cost. You borrow more and pay interest on the costs for the whole term, so the total saving falls even though breakeven looks immediate. If you have the cash and no better use for it, paying at closing is cheaper; if the alternative is high-rate debt, rolling in may still be right.

Should I pay points on a refinance?

Only if you will keep the loan long enough to recover them, which is the same test as the refinance itself but with a longer runway. Points push the breakeven further out. The APR calculator shows what points and fees are really worth as a rate.

Is refinancing better than just paying extra?

They do different jobs: refinancing lowers the rate, paying extra shortens the term. Recasting, refinancing or paying extra compares all three on one chart. And whether the freed-up money is best aimed at the mortgage at all is what mortgage payoff versus investing answers.

Refinance Calculator

This refinance calculator gives the breakeven month, when the lower payment finally covers what the refinance cost, and compares interest over the term you have left, not over a fresh 30 years. Whether it pays depends almost entirely on how long you stay.

Example numbers

The answerfrom an example

Worth doing: you recover the costs in 11 months and are $17,311 ahead over the 7 years you expect to stay.

Worked on $280,000 at 7.20% with 22 years left, refinanced at 5.80%. Change anything below to use yours.

New monthly payment: $1,642.91
Monthly saving: $473.30
Breakeven: Month 11

The figures behind it

New monthly payment: $1,642.91; Against $2,116.21 now.
Monthly saving: $473.30; Partly bought by stretching the term 8 years longer.
Breakeven: Month 11; 11 months of savings to cover $4,900 of costs.
Over the 7 years you stay: +$17,311; Refinancing comes out ahead over the time you actually keep the loan.
Interest over your current term: $279,676; Against $278,677 on the loan you have, measured over the same 22 years.
If you keep it to the end: -$5,900; Costs included, over your current remaining term.

What refinancing costs up front$4,900

29%

71%

Discount points0.500% of the balance.$1,400
Other closing costs$3,500

What you still owe on each loan

Years from today

Keep the current loanRefinance

Payment scheduleShow

The table scrolls sideways

Item	Current loan	Refinanced
Balance refinanced	$280,000	$280,000
Interest rate	7.200%	5.800%
Term	22 years	30 years
Monthly payment	$2,116.21	$1,642.91
Up-front costs	$0	$4,900
Interest over 22 years	$278,677	$279,676
Cost over the 7 years you stay	$0	−$17,311

What this result assumes

The two loans are compared over the term you have left, not over each loan’s own life. A new 30-year loan measured to its own end would be credited with payments the old one never had to make.
Cost is measured as the amount borrowed plus the interest charged, which is exactly the cash handed over plus the balance still owed. Adding the outstanding balance separately would count it twice.
Escrowed property tax and insurance are excluded. They do not change when you refinance, so they cancel out of the comparison.
The new term is 8 years longer than what you have left. Part of the lower payment is the better rate and part is simply spreading the balance further, set the new term to 264 months to separate the two.

Methodology

Reviewed September 1, 2026

The lower payment is the least useful number

A refinance is sold on the monthly saving, and that figure conflates two very different things. Some of it comes from the better rate, which is a genuine gain. The rest comes from resetting the term — dropping a loan with 22 years left back to 30 lowers the payment no matter what the rate does, and would lower it even at a worse rate.

This calculator reports the term extension explicitly for that reason. If you want to see the rate effect on its own, set the new term equal to the months you have left; the payment saving that survives is the real one.

The second thing the monthly figure hides is that the costs are paid on day one and recovered slowly. Breakeven is the month at which cumulative savings finally cover them — and if you sell or refinance again before it, the transaction lost money regardless of how good the rate looked.

Comparing honestly across different terms

The two loans are measured over the term you currently have left, not over each loan’s own life. Running a new 30-year loan to its own end and comparing total interest would credit it with years of payments the old loan never had to make, which makes almost any refinance look bad.

Cost at any point is the amount borrowed plus the interest charged to date. That is a complete measure, because the payments you have made plus the balance you still owe always equal exactly that — every payment is interest plus a principal reduction, so the two sides collapse into one figure.

It is worth stating because the obvious-looking alternative is wrong: adding the outstanding balance on top of interest paid counts it twice, and makes a slower-amortising loan look catastrophic rather than merely slower. An earlier draft of this engine did precisely that, and the test suite now pins the identity.

Points, costs, and rolling them in

Discount points are a fee paid now to lower the rate later, quoted as a share of the balance. Like the refinance itself, they only pay off if you keep the loan long enough — and they lengthen the breakeven they are meant to improve.

Rolling the closing costs into the new loan removes the cash outlay, and the calculator reports breakeven as immediate when you do, because there is no separate outlay left to recover. That is honest but incomplete: you have borrowed more, and you will pay interest on the costs for the whole term. The saving figures still capture it, since the larger loan generates more interest.

Escrowed property tax and insurance are left out entirely. They do not change when you refinance, so they cancel from both sides of the comparison and would only add noise.

Assumptions

Both loans are fixed rate, with level payments and no extra payments.
Interest is compared over the term remaining on your current loan, not over each loan’s own life.
Cost is the amount borrowed plus interest charged, which equals payments made plus the balance still owed.
Closing costs are either paid in cash at closing or added to the loan, as selected.
Escrowed property tax and hazard insurance are excluded — they are unchanged by refinancing.
Mortgage insurance is not modelled; a refinance can add or remove it depending on your equity.
The saving from a lower payment is treated as kept, not invested. Investing it would improve the refinance case.
No prepayment penalty on the existing loan is modelled.
The tax deductibility of mortgage interest is ignored, which slightly overstates the saving for filers who itemize.

Sources

Common questions

When is refinancing worth it?: When you keep the loan past the breakeven month, the point where the accumulated monthly savings cover what the refinance cost. The old rule about needing a full percentage point of rate improvement is a poor guide; what matters is the size of your balance against the costs, and how long you stay. Enter both above and the calculator gives the exact month.
How do I calculate the refinance breakeven point?: Divide the total closing costs by the monthly payment saving. At $4,900 of costs and a $300 monthly saving, that is 17 months. Beyond that you are ahead; before it you are not. The calculator does this and also marks the month on the balance chart.
Does refinancing to a lower rate always save money?: No, and the term is usually why. Resetting a loan with 22 years left back to 30 lowers the payment even at a worse rate, and can raise total interest despite a better one. Set the new term equal to your remaining months to see the rate effect on its own, that is the honest comparison.
Should I roll the closing costs into the loan?: It removes the cash outlay but not the cost. You borrow more and pay interest on the costs for the whole term, so the total saving falls even though breakeven looks immediate. If you have the cash and no better use for it, paying at closing is cheaper; if the alternative is high-rate debt, rolling in may still be right.
Should I pay points on a refinance?: Only if you will keep the loan long enough to recover them, which is the same test as the refinance itself but with a longer runway. Points push the breakeven further out. The APR calculator shows what points and fees are really worth as a rate.
Is refinancing better than just paying extra?: They do different jobs: refinancing lowers the rate, paying extra shortens the term. Recasting, refinancing or paying extra compares all three on one chart. And whether the freed-up money is best aimed at the mortgage at all is what mortgage payoff versus investing answers.

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