Calculate monthly savings, break-even point, and total interest saved from refinancing.
Auto-updated · Verified daily against IRS, Fed & Treasury sources
Enter your numbers below
Carlos, 38, electrician in Tampa, FL, bought his home in 2022 at $335,000 with a 7.5% 30-yr mortgage. He's 3 years in; balance is $318,000. Rates have dropped to 6.5%. A local lender offers a no-cash-out refi with $6,200 in closing costs.
Takeaway: Carlos recoups the $6,200 closing costs in under 2 years. If he stays 5 more years he nets ~$13,600 in savings. Pitfall: resetting to a new 30-year term means he pays interest longer. A 20-year refi instead of 30 raises payments slightly but saves ~$88k in lifetime interest. Staying in the area long-term makes refinancing compelling.
The standard break-even divides closing costs by monthly savings. A $6,000 closing cost saving $200/month breaks even in 30 months. But $6,000 invested at 7%/yr returns $11,786 in 10 years — the opportunity cost of paying closing costs out of pocket is $5,786 in foregone investment growth.
Refinancing a 30-year loan you have held for 7 years into a new 30-year loan restarts interest-front-loading. On a $350k original loan at 6% (now $315k balance), refi to 5.5% over 30 years saves $130/month but costs $40,000 more in total interest vs. simply continuing the original loan to payoff.
Mortgage Payoff CalculatorA cash-out refi draws equity — increasing the loan balance, not just resetting the rate. Replacing a $300k balance with a $380k loan to extract $80k of equity is not a pure rate-save event. Total interest cost increases by $50,000–$80,000 depending on rate differential and term.
If a cash-out refi pushes LTV above 80%, PMI re-enters the equation — often $150–$300/month — offsetting rate savings. A homeowner with $420k home and $320k balance (76% LTV) who cashes out to $360k (86% LTV) triggers PMI that can take 4+ years to burn off.
PMI Removal CalculatorRefinancing from a 5/1 ARM to a fixed rate eliminates future rate-reset exposure. If the ARM would have reset 2% higher in year 6, the fixed refi saves $550/month for 25 years — far exceeding the standard break-even estimate, which only compares current payments.
Based on your inputs
Reality Score:save 3 numbers across housing, debt & cash to see how your full picture holds up (0–100). One calc alone can't tell you that.
Stays in your browser. Never sent to us.
Analyze 3+ calcs to unlock your Financial Picture dashboard (cross-analysis of all your numbers).
A mortgage refinance is essentially paying off your existing loan with a new loan. It's not magic—you're not reducing principal, you're replacing one debt with another. But if you can get a lower interest rate, the new loan costs less over time.
When you refinance:
1. New lender pays off your old loan: You no longer owe the original lender
2. You take out a new loan: From the new lender for the outstanding balance
3. You pay closing costs: These are the fees, and they range from $3,000-$12,000 typically
4. You get a new payment and term: If the rate is lower, the payment should be lower (or you can shorten the term)
The key question: Do the long-term savings from a lower rate exceed the upfront closing costs?
Break-even is the month where your cumulative savings equal the closing costs you paid. After this point, you profit from the refi.
Simple Formula:
Break-Even Months = Closing Costs ÷ Monthly Savings
Detailed Example:
Current loan: $300,000 at 7.5%, 20 years remaining
Current payment: $2,170/month
Refi offer: $300,000 at 6.2%, 20 years
New payment: $1,960/month
Monthly savings: $210
Closing costs: $5,400
Break-even: $5,400 ÷ $210 = 25.7 months (about 2.1 years)
The Decision Framework:
• Break-even < 1 year: Refi immediately. Rare, but happens in strong rate-drop markets
• Break-even 1-3 years: Refi if you plan to stay 5+ years. Good risk/reward
• Break-even 3-5 years: Refi only if you're certain you'll stay that long. Higher risk
• Break-even > 5 years: Usually not worth it unless rates drop significantly more
• No savings: Don't refi. Pay off early with that"payment difference" instead
The size of rate reduction determines the magnitude of savings.
Monthly Savings Per Rate Point:
Every 1% rate reduction saves approximately $200/month per $100,000 borrowed (varies by remaining term)
Examples on a $300,000 mortgage:
• 7.5% → 7.0% (0.5% reduction): ~$300/month savings
• 7.5% → 6.5% (1.0% reduction): ~$600/month savings
• 7.5% → 5.5% (2.0% reduction): ~$1,200/month savings
This is why refinancing only makes sense if you're getting a meaningful rate reduction. A 0.25% reduction (7.5% → 7.25%) saves only ~$150/month. With $5,000 closing costs, break-even is 33 months. For most people, that's too long.
Rule of Thumb: Refi if you can get 0.5%+ rate reduction
Below 0.5%, closing costs usually don't make economic sense unless you're confident you'll stay 7+ years.
Closing costs are the hidden tax on refinancing. They typically include:
Lender Fees (50% of total costs):
• Origination fee: 0.5-1.5% of loan ($1,500-$4,500 on $300k)
• Processing fee: $500-$1,000
• Underwriting fee: $500-$1,200
• Appraisal fee: $400-$800
Third-Party Fees (35% of total costs):
• Title search and insurance: $500-$1,500
• Escrow/closing costs: $500-$1,500
• Recording and filing: $100-$300
• Survey (if needed): $300-$600
Pre-Paid Items (15% of total costs):
• Property taxes (pro-rata): $500-$2,000
• Insurance (prepaid): $500-$1,500
• HOA fees (if applicable): $0-$2,000
Total Average: 2-6% of loan amount
On a $300,000 refi: $6,000-$18,000 (most commonly $8,000-$10,000)
Negotiating Closing Costs:
You have more power than you think. Tactics:
1. Get 3+ quotes. Costs vary widely. Competition works. Getting a 0.5% lower fee across lenders saves $1,500
2. Ask for fee waivers."Will you waive the processing fee if I commit today?" Many will
3. Negotiate the rate/fee tradeoff."Can I take a slightly higher rate (6.25% instead of 6.2%) in exchange for lower closing costs?" Often yes (called"discount points" or"lender credits")
4. No-closing-cost refi. Some lenders offer this—they roll costs into the loan (higher rate) instead of upfront payment. Only use if break-even would be > 7 years with traditional refi
Many people who refi also switch from a 30-year to a 15-year mortgage. This is a separate decision from rate reduction.
Example:
Current: $300,000 at 7.5%, 20 years remaining = $2,170/month
Refi Option A: $300,000 at 6.2%, 20 years = $1,960/month (savings: $210/mo)
Refi Option B: $300,000 at 5.9%, 15 years = $2,133/month (savings: $37/mo but paid off 5 years earlier)
Option B looks worse on monthly payment. But let's look at total interest:
Option A (refi to 20yr at 6.2%): Total interest paid = $170,000
Option B (refi to 15yr at 5.9%): Total interest paid = $95,000
Difference: $75,000 saved by shortening term
When 15-year refi makes sense:
• You can afford the higher payment (usually 20-30% higher)
• You're confident in job stability
• You want to own home free-and-clear before retirement
• You have no high-interest debt (credit cards, personal loans)
When 30-year refi makes sense:
• Lower payment is crucial for cash flow
• You have flexible/variable income
• You want funds for other investments (you can invest the difference at > mortgage rate)
• You're older and prefer smaller payment in retirement
Our refinance calculator lets you model both options and see total interest paid.
Issue 1: Resetting the Loan Clock
If you refi from a 30-year mortgage with 20 years remaining, you can:
• Refi to a new 30-year loan (you pay for 30 more years, total 50 years)
• Refi to a new 20-year loan (keep the original timeline)
• Refi to a new 15-year loan (pay off faster)
Most people accidentally reset to 30 years. This is terrible—you're extending your payoff date by 10 years!
Example: You have 20 years left on your 30-year mortgage. You refi to a new 30-year. You now pay for 30 MORE years, total 50 years. The rate savings are offset by paying 10 extra years of interest.
Always match original remaining term or shorter. If you have 20 years left, refi to 20-year (or 15-year), not 30-year.
Issue 2: PMI Removal
If your current mortgage has PMI (Private Mortgage Insurance, because you put down < 20%), refinancing might remove it if you have 20%+ equity now.
PMI costs: 0.3-1.5% of loan balance annually ($900-$4,500 per year on $300,000)
If removing PMI saves $100/month ($1,200/year), and closing costs are $5,000, break-even is only 4 years—a better deal than pure rate savings.
Check:"Does refinancing allow me to remove PMI?" If yes, add that savings to rate savings in your break-even calculation.
Issue 3: Tax Implications (Mortgage Interest Deduction)
You can deduct mortgage interest on your taxes only if you itemize deductions (standard deduction is $27,700 for married filing jointly in CURRENT_YEAR).
If you're already itemizing and paying $15,000/year in interest, refinancing and lowering your payment reduces that deduction slightly. This is rarely material but worth noting.
Mortgage Broker:
Pros: Can shop rates from 50+ lenders, often competitive pricing
Cons: Charges broker fees (often 1-1.5% of loan), you're paying for shopping convenience
Best for: Non-traditional borrowers, complex situations where shopping power matters
Direct Lender (Bank):
Pros: Direct relationship, sometimes lower fees, streamlined process
Cons: Only your lender's rates, less negotiating power
Best for: Strong credit, conventional loan, want simplicity
My Recommendation: Get quotes from 2-3 direct lenders (Wellsfargo, Chase, etc.) and 1 broker. Compare all-in closing costs, not just rate. 0.1% rate difference is worth $200/month; $1,000 in closing costs isn't.
Refi if YES to all:
☑ Rate reduction is 0.5% or more
☑ Break-even is less than 3 years
☑ You plan to stay in home for 5+ years
☑ You're not near retirement (don't want payment obligations)
☑ You can afford closing costs without borrowing more (or rolling into loan)
Don't refi if YES to any:
☒ Break-even is greater than 5 years
☒ You might move or sell within 3 years
☒ You're extending loan term beyond original payoff date
☒ You have high-interest debt (credit cards) consider pay instead
☒ You're within 5 years of retirement and want to own home free-and-clear
Typically 30-45 days from application to funded. Appraisals, underwriting, and document review take time. Start early if you want to lock in rates before they move.
Difficult. Most conventional lenders require 20% equity minimum. FHA streamline loans allow refi even with negative equity. Government-backed programs (HARP, HAMP) existed historically for underwater borrowers—check if still available in your state.
Usually yes, though some lenders offer"no-appraisal" refi if you have strong credit and good equity. Appraisal costs $400-$800. It's worth it if it unlocks PMI removal or lower rate.
Conventional refi: 620+ minimum (740+ for best rates). FHA streamline: 580+. VA (if eligible): typically 620+. Every 20-point improvement can save 0.25-0.5% in rate.
Yes, but it's more expensive. HELOCs typically have higher rates than primary mortgages. Refinancing makes sense if you can get 1%+ reduction and plan to borrow for 5+ years.
PMI is a hidden tax on low-down-payment mortgages. If you borrowed 95% of home price (put down only 5%), the lender is taking significant risk. If you default and the lender forecloses, home prices might have dropped and they can't recover their full loan amount.
PMI protects the lender, not you. It's your insurance premium on their risk.
Typical PMI Costs:
Loan amount: $380,000 (80% of $475,000 home)
Down payment: $95,000 (20%)
PMI rate: 0.55% annually (varies by credit score, down payment %)
PMI payment: $209/month ($2,508/year)
Loan amount: $427,500 (90% of $475,000 home)
Down payment: $47,500 (10%)
PMI rate: 0.95% annually
PMI payment: $339/month ($4,068/year)
Over a 30-year mortgage, PMI costs $90,000-$150,000+ depending on your down payment percentage. That's real money.
PMI automatically disappears when you have 20% equity in your home through principal paydown. On a $475,000 home purchase, 20% equity = $95,000.
Reaching 20% equity happens through:
1. Paying down the mortgage: If you put down 5% initially and pay extra toward principal, you'll reach 20% equity in 7-10 years (depending on mortgage size)
2. Home appreciation: If your home appreciates 5-10% in value, you're suddenly at 20% equity without paying anything
3. Combination: Most common—5 years of payments + 3% home appreciation gets you to 20%
Timeline to PMI Removal (No Appreciation):
Home price: $500,000, down payment 5% ($25,000)
Loan: $475,000 at 7% for 30 years
Payment: $3,155/month (without PMI)
With PMI (0.7%): $3,155 + $277 = $3,432/month
Principal balance after:
• Year 1: $468,000 (paid down $7,000)
• Year 3: $452,000 (paid down $23,000, at 9.4% equity)
• Year 5: $433,000 (paid down $42,000, at 13.4% equity)
• Year 8: $403,000 (paid down $72,000, at 19.4% equity—close!)
• Year 9: $389,000 (paid down $86,000, at 22.2% equity—PMI removable!)
At year 9, you've accumulated $149,300 in PMI payments. If you'd refinanced at year 8 when home appreciated, you'd have removed PMI 1-2 years earlier.
A refinance strictly to remove PMI has different math because you're not chasing rate savings—you're eliminating a recurring cost.
Example: PMI Removal Refi
Current loan: $430,000 at 7.0%, 25 years remaining, payment = $3,142
Current PMI: $280/month
Total current payment: $3,422/month
Home value (estimated): $537,500
Equity: $107,500 (20% exactly)
Able to refi without PMI: Yes
New refi: $430,000 at 7.1% (rate slightly higher, but no PMI), new payment = $3,065
New total payment: $3,065 (no PMI!)
Monthly savings: $357
Closing costs: $5,200
Break-even: $5,200 ÷ $357 = 14.6 months
This is a slam dunk refi. Even with a slightly higher rate, removing PMI saves so much that break-even is under 2 years.
Why PMI Removal Refis Are Different:
You don't need a rate reduction to make it pencil out. Even at the same rate (or slightly higher), removing PMI often justifies closing costs within 18 months.
Home prices fluctuate. Maybe your $500,000 home is now worth $535,000 (7% appreciation). Check your equity:
Method 1: Use Online Estimates
Zillow, Redfin, Realtor.com provide free home value estimates. Not appraisal-quality, but useful indicators. If your $500k home shows $540k, you might have 20% equity.
Method 2: Pull Your Recent Appraisal
From mortgage documents or recent HELOC application. If less than 2 years old, reasonably accurate.
Method 3: Get a Professional Appraisal
Costs $400-$800. Worth it if you're close to 20% equity—could unlock PMI removal.
Quick Calculation:
Original home price: $500,000
Original down payment: 5% = $25,000
Original loan: $475,000
Current loan balance: $445,000 (after 2 years of payments)
Current estimated home value: $535,000 (7% appreciation)
Current equity: $90,000
Equity percentage: $90,000 ÷ $535,000 = 16.8% (not yet 20%)
If home appreciated to $545,000:
Equity: $100,000 ÷ $545,000 = 18.3% (still not 20%)
If home appreciated to $555,000:
Equity: $110,000 ÷ $555,000 = 19.8% (almost there!)
If home appreciated to $560,000:
Equity: $115,000 ÷ $560,000 = 20.5% (PMI removable!)
Takeaway: In moderate appreciation markets (2-3%/year), it takes 7-8 years to reach 20% equity from 5% down. In hot markets (5%+ appreciation), it can happen in 3-4 years.
Path 1: Wait and Pay PMI Until 20% Equity Through Principal
Loan: $475,000
PMI: $280/month
Time to 20% equity: 9 years
Total PMI paid: $30,240
Pros: No upfront costs
Cons: Pay years of PMI unnecessarily
Path 2: Make Extra Principal Payments to Reach 20% Equity
Loan: $475,000
Extra payment: $400/month toward principal
Time to 20% equity: 5 years
Total PMI paid: $16,800
Extra principal paid: $24,000
Total cost: $40,800
Pros: Reach 20% equity faster
Cons: Requires discipline on extra payments; $40,800 total out of pocket
Path 3: Refinance Now (if Home Appreciated to 20% Equity)
Loan: $430,000 (current balance)
Refi rate: 7.1% (slightly higher, no PMI)
Closing costs: $5,200
PMI removal: Immediate
Time to 20% equity: 0 years (already there)
Total PMI paid: $0 (after refi)
Total cost: $5,200
Pros: Stop PMI immediately; only cost is refi fees
Cons: Requires 20% equity already (through appreciation or principal payment)
The winner: Path 3 by far, if you have 20% equity. If you don't have 20% equity yet, do Path 2 (extra principal) instead of Path 1 (waiting).
Some mortgages have automatic PMI removal at 20% equity. Others require you to request removal manually. If your loan requires manual request, you may want to act.
Banks have no incentive to remove PMI for you—it's profitable. You could reach 20% equity and keep paying PMI for years if you don't request removal.
What to do:
Every 6 months, estimate your home value and calculate equity percentage. When you reach 20%:
1. Contact your lender:"I believe I've reached 20% equity. Please remove my PMI."
2. They may require an appraisal (your cost, ~$400) or accept a BPO (broker price opinion, ~$100)
3. If they won't remove it, consider refinancing with a lender that will
Worst case: You're 1-2 years past 20% equity and still paying PMI. That's costing you $280-$400/month unnecessarily. Refi immediately to cut your loss.
Yes, if you've reached 20% equity and your lender allows it. Conventional loans typically allow PMI removal at 20%. FHA loans require 22% equity and are harder to remove. Ask your lender about automatic removal date.
PMI applies to any loan with less than 20% down, regardless of term. A 15-year refi still requires 20% equity to remove PMI (it's not paid off faster, just paid at higher monthly rates).
Yes. Zillow/Redfin estimates are ±5% accurate. For refinancing, lenders will order an appraisal anyway (~$400), so use online estimates as a guide only.
Yes, if you're close (say, 18% equity and 2 years away from 20%). An extra $200/month gets you there 1 year faster, removing $3,360/year in PMI. Cost-benefit is clear.
Not through appreciation. You'd need to pay down to 20% equity through principal payments. Refinancing also becomes harder if you're underwater or below 20% equity (lenders won't touch it).
Scenario: $300,000 loan amount
30-Year Mortgage at 7.0%:
Monthly payment: $1,996
Total payments: 360
Total amount paid: $718,800
Total interest: $418,800
Home paid off by: Age 65 (if purchased at age 35)
15-Year Mortgage at 6.5%:
Monthly payment: $2,345
Total payments: 180
Total amount paid: $421,800
Total interest: $121,800
Home paid off by: Age 50 (if purchased at age 35)
The Comparison:
Monthly difference: $2,345 - $1,996 = $349 more/month for 15-year
Interest savings: $418,800 - $121,800 = $297,000
Time to payoff difference: 15 years sooner with 15-year mortgage
If you can afford the extra $349/month, the 15-year mortgage saves nearly $300,000.
Here's where it gets interesting: the 30-year mortgage wins if you can invest the $349 monthly difference at returns higher than your mortgage rate.
The Math:
Take the $349/month payment difference. Invest it at market returns (~8-10% historical stock market average).
15-year: Pay off home at year 15 with $0 remaining debt. Equity: $300,000 (100% owned).
Then save the full $2,345/month for next 15 years = $423,000
30-year: At year 15, still owe ~$225,000 on mortgage. But invested $349/month at 8% = $81,000.
Total wealth at year 15: $300,000 (home equity) + $81,000 (investments) - $225,000 (remaining mortgage) = $156,000
Wait, that sounds bad for 30-year. Let's look at year 30:
15-year: $300,000 home + $423,000 invested = $723,000
30-year: $300,000 home (paid off) + $81,000 (from first 15 years) + $347/month × 15 years invested at 8% = $81,000 + $117,000 = $198,000
Total: $300,000 + $198,000 = $498,000
The 15-year mortgage results in more wealth. But wait—in the 30-year scenario, consider have invested the full $2,345, not just $349 difference. This is where it gets complex.
The Real Argument:
If you're disciplined enough to invest $349/month and earn 8%+ returns, 30-year is mathematically optimal. But most people aren't disciplined. They"find" the extra $349 and spend it. In that case, 15-year forces savings through the mortgage payment itself.
Choose 15-Year Mortgage If:
☑ You want to own home free-and-clear before retirement (age 65)
☑ You value certainty over flexibility
☑ Your income is stable and you don't anticipate job changes
☑ You lack discipline to invest lump-sum savings
☑ You're confident rates won't rise dramatically (refinancing risk is lower)
☑ You want to build wealth aggressively through forced savings
☑ You're age 45+ (consider avoid new 30-year debt at this point)
Choose 30-Year Mortgage If:
☑ You want maximum monthly cash flow flexibility
☑ You're just starting your career (income may grow, justifying the larger payment later)
☑ You have variable or irregular income
☑ You want to invest aggressively (stock market, business, side ventures)
☑ You're young enough to afford payments in retirement (age 30-40)
☑ You expect significant raises that will make payments smaller relative to future income
☑ You want to preserve capital for other investments/opportunities
Beyond pure math, there's a behavioral component:
15-Year Psychology:
Advantage: You can't undiscipline yourself. The $2,345 payment forces saving and debt payoff.
Disadvantage: Inflexible. Job loss or emergency hits harder when committed to high payment.
30-Year Psychology:
Advantage: Flexibility. Lower payment = easier to absorb income disruptions.
Disadvantage: Temptation to spend the difference instead of investing. Most people do.
Studies show people with 15-year mortgages accumulate more wealth by retirement than 30-year borrowers in similar income brackets. Not because math says so, but because 15-year forces discipline.
If age 25: Either works. 30-year keeps options open. 15-year ensures payoff by 40. 15-year is stronger if you want predictability.
If age 35: 15-year mortgage makes sense. You'll own home by 50 (working years), debt-free in retirement. 30-year means payments into age 65.
If age 45: 15-year is nearly essential. A 30-year mortgage extends until age 75—uncomfortable if retired at 65. You'd be paying on a fixed retirement income.
If age 55+: Avoid 30-year mortgages. Consider own the home before retirement. 10-year mortgages are preferable even if payments are higher.
Rule of Thumb: Loan payoff date should be 5-10 years before expected retirement date.
Many people take out 15-year mortgages, then refi into 30-year mortgages when times get tough. This is financially destructive.
Example: You have 10 years left on a 15-year mortgage (original balance $300,000, current balance $150,000). You refi to a new 30-year term at similar rates.
New payment: ~$1,000/month
Payoff date: 30 years from now (age 75 instead of 55)
Total interest: You're essentially extending your debt another 20 years
If stretches your budget the 15-year payment, don't take it out. Be honest about cash flow capacity. It's better to take a 30-year and overpay (turning it into a faster payoff) than take a 15-year and struggle.
Many financial advisors suggest this compromise:
Take a 30-year mortgage (flexibility, lower baseline payment). Then pay extra toward principal whenever possible.
Example: 30-year mortgage with $1,996 payment. Pay $2,345 whenever you can (bonus, tax refund, raise). In years you can't, you can survive on just $1,996.
Result: Payoff date somewhere between 15-30 years, determined by your actual cash flow.
This requires discipline (the bank won't force extra payments on you), but offers flexibility with 15-year-like payoff speed if you succeed.
Pro tip: Set up automatic extra payment to principal (usually available through lender). This removes the temptation to skip it.
15-year mortgages typically have rates 0.5-0.75% lower than 30-year (not the full difference you'd expect, but a real advantage).
Today's rates (illustrative):
• 30-year: 7.0%
• 15-year: 6.5%
Why the difference?
Lender risk: 30-year has more time for borrower to default, so higher rate
Loan duration: Longer loans are riskier in inflationary environments
Prepayment risk: Borrowers with 15-years are more likely to refinance if rates drop dramatically
This rate advantage (0.5-0.75%) is real but limited. It doesn't make 15-year cheaper per se—it just means the payment difference is smaller than mathematically expected.
Yes, through refinancing. You'll pay closing costs ($5,000-$10,000) but can refi at any time. Make sure to stay on the original payoff date or shorten it, don't extend it.
Then you'll pay it off at 30 years. This is fine if you'll own the home free-and-clear before or shortly after retirement. Just don't plan on being debt-free in retirement if you take 30-year at age 50+.
Usually no. Investment properties should use 30-year mortgages to preserve flexibility and cash flow. You want tenants' rent to cover payment with margin. Shorter terms reduce that margin.
Doesn't matter much—you'll pay off the balance regardless. Consider ARM (adjustable-rate mortgage) if rates are expected to decline, or fixed rate if they might rise. The payoff date is irrelevant if you're selling.
Depends on rates. If mortgage rate is 7% and you can earn 8%+ in index funds, larger down payment is mathematically inferior (you're giving up returns). If rates are 5% and markets are uncertain, larger down payment provides psychological benefit. Usually, best to make standard 20% down and invest the difference.
Refinance if you can lower rate by 0.5-1%+ AND plan to stay long enough to recoup closing costs. Break-even typically 18-36 months. Refinance makes sense if you stay longer.
Break-even months = Closing Costs ÷ Monthly Savings. If costs $4,000 and save $200/month: 20 months to break even. Plan to stay 20+ months after refinancing.
Refinance closing costs: 2-6% of loan amount or $3,000-$10,000. Include appraisal, lender fees, title, recording. Some lenders offer "no-closing-cost" refi at higher rate.
If payment is affordable, 15-year saves massive interest (often $100K+) and builds equity faster. Requires 15-20% higher monthly payment. Powerful if cash flow allows.
Conventional refi: 620+ (740+ for best rates). FHA streamline: 580+. VA: typically 620+. Every 20 points of credit score improvement can save 0.25-0.5% in rate.
The traditional rule is 1% lower, but modern analysis shows 0.5-0.75% can be worthwhile depending on your loan balance and planned ownership duration. Calculate the break-even point by dividing closing costs by your monthly payment savings.
Break-even equals total closing costs divided by monthly payment savings. If closing costs are $4,500 and you save $150 per month, break-even is 30 months. Only refinance if you plan to stay in the home past the break-even point.
Typical refinancing costs are 2-5% of the loan amount, including appraisal at $300-$500, origination fees of 0.5-1.5%, title insurance, and recording fees. On a $300,000 loan, expect $6,000-$15,000 in total closing costs.
A 15-year mortgage has higher payments but saves dramatically on total interest. Refinancing a $300,000 balance from 30-year at 7% to 15-year at 6.5% saves over $200,000 in interest despite the higher monthly payment amount.
Yes, but you may likely need PMI on the new loan if equity is below 20%. FHA streamline refinance requires minimal equity. Some programs like VA IRRRL allow refinancing without an appraisal. Higher LTV ratios may mean higher interest rates.
Monthly savings = Current payment - New payment. Break-even months = Closing costs / Monthly savings. Total savings = (Monthly savings × remaining months) - Closing costs.
Every formula on this page traces to a federal agency, central bank, or peer-reviewed institution. We cite the rule-makers, not secondhand blogs.
Found an error in a formula or source? Report it →
Result: Do not refinance — lower payment is an illusion from term reset; total interest rises $100k+
Stretching 20 remaining years back to 30 at a higher rate creates a lower monthly payment but pays $100k+ more interest over the life. Only refinance when the new rate is ≥0.75% below current AND you can hold the loan past break-even (closing cost ÷ monthly savings).
Result: Extracts $150k at 6.55% — deploy to rental yielding 7%+ cap rate for positive arbitrage
Cash-out refis price 0.25–0.50% higher than rate-term refis. Breakeven for the rental purchase requires post-tax rental yield > post-tax mortgage cost. Texas property tax drag (1.80%) means rentals need 8%+ gross cap rate to pencil. Conservative investors avoid cash-out when extract-rate > target-investment-yield.
Result: Rate rises but eliminating $110/mo MIP produces net savings — worth it if holding 3+ years
FHA MIP sticks for the life of the loan (for FHA loans originated post-2013 with <10% down). Refinancing to conventional once LTV drops below 80% removes the insurance. Even at a higher rate, eliminating $110/mo MIP often saves money net when held 3+ years. Run the full calc.
Result: Break-even in 22 months — worthwhile if holding 3+ more years
Jumbo loans (over $806,500 in 2026 high-cost areas) have smaller rate spreads but larger dollar savings per basis point because of loan size. A 0.70% drop on $1.2M = $8,400/yr. High-balance borrowers refi more often because the dollar math clears closing costs faster.
Resetting a 20-year-remaining loan back to 30 years almost always reduces payment — but adds tens of thousands in interest. Keep the remaining term or shorter.
Impact: Refinancing a $275k, 20-remaining-year loan into a new 30-year can add $100k+ in lifetime interest.
Break-even = closing costs ÷ monthly savings. If break-even is 36 months but you're moving in 24, refi is a money-loser. Always model holding period vs break-even.
Impact: A $6,000 refi costing $150/mo savings needs 40 months to pay back — leave in year 3 = $1,800 lost.
"No-cost" refis add closing fees to principal or take a rate bump (typically +0.25%). Over 30 years, rolled costs can more than double. Pay cash at closing if cash flow allows.
Impact: $6,000 rolled into loan at 6.3% for 30 years costs $13,400 in total payments.
Converting 3% mortgage + 22% credit card into 6.5% refi may feel like savings but loses the cheap 3% rate forever. A HELOC or HELOAN preserves the first-mortgage rate.
Impact: A borrower with $250k at 3% + $30k CC at 22% who refis to $280k at 6.5% pays $230k more interest over 30 years vs keeping the first mortgage.
Rate shopping saves the median refi borrower $1,500+ per CFPB research. Refis are competitive — 3+ lender quotes within 14 days count as a single credit inquiry.
Impact: A 0.125% rate difference on a $400k 30-yr refi = $10,500 over life.
State-specific rates, taxes, and cost-of-living adjustments
Calculations are for educational purposes only. Consult a qualified financial advisor for personalized advice.