Is refinancing worth it?
Refinancing replaces your existing mortgage with a new one — usually to secure a lower interest rate, change your loan term, or tap into home equity. Whether it's worth it comes down to a simple trade-off: the upfront closing costs versus your ongoing monthly savings. This calculator computes exactly how many months it takes to recoup those costs.
A worked example
Say you refinance a $280,000 balance from 7.25% down to 6.25% and pay $6,000 in closing costs. Your principal & interest payment drops from about $1,910 to $1,724/month — roughly $186/month in savings. Dividing the $6,000 closing cost by that $186 monthly savings gives a break-even point of about 32 months, or just under 3 years. Stay in the home past that point and the refinance is a net win; move sooner and you'll have paid more in closing costs than you saved.
Common refinance types
- Rate-and-term refinance: changes your rate and/or term without changing your balance meaningfully — the scenario this calculator models.
- Cash-out refinance: borrows against your home equity, increasing your loan balance in exchange for cash at closing.
- Streamline refinance (FHA/VA): a simplified process for existing FHA or VA borrowers refinancing into a new FHA or VA loan, often with reduced documentation.
Monthly savings vs. lifetime cost
A lower monthly payment isn't the whole story. If you refinance a loan you've already paid down for several years back into a fresh 30-year term, you can end up paying more total interest over time even though your monthly payment drops. This calculator shows both numbers side by side so you can make an informed trade-off between cash flow today and total cost over time.
Want to see how today's rates compare across a range of options first? Try the Mortgage Rate Calculator.