Short answer: a refinance is worth it when both tests pass — you recover the closing costs reasonably fast (the break-even month), and the new loan costs less over its whole life. Plenty of refinances pass the first test and fail the second, because restarting a 30-year term quietly adds years of interest. The prefilled example is exactly that trap: the payment drops $370 a month and breaks even in 17 months — yet the refinance costs $157 more over the loans’ lives. This calculator shows both numbers, plus what changes if you roll the closing costs into the loan instead of paying them at closing.
| Current monthly payment (principal & interest) | $0 |
| New monthly payment | $0 |
| Break-even point | — |
| Total cost of keeping your loan | $0 |
| Total cost of the refinance (incl. closing costs) | $0 |
| Lifetime savings from refinancing | $0 |
See year-by-year balances for both loans
| Year | Balance — keep | Balance — refinance |
|---|
Educational estimate only — not financial advice and not a loan offer. Your current payment is calculated from the balance, rate, and years left you enter. “Total cost” means every monthly payment over the loan’s life plus closing costs — the figure lenders advertise least. Taxes, insurance, and HOA are excluded because they don’t change with a refinance. Your numbers never leave your browser.
How this calculator works
- Your current payment is calculated from the balance, rate, and years left you enter, using the standard amortization formula. “Total cost of keeping” = that payment × the months remaining.
- The new payment comes from the new loan amount (your balance, plus closing costs if you roll them in), new rate, and new term. “Total cost of the refinance” = every new payment + any closing costs paid upfront.
- Break-even month = closing costs ÷ monthly payment savings, rounded up. It answers “how long until the refinance has paid for itself?” If the new payment is higher, there is no break-even — the tool says so.
- Lifetime savings = total cost of keeping − total cost of refinancing. This is the number lenders’ ads leave out, and the one that catches term-restart traps.
Taxes, insurance, and HOA are excluded on purpose: a refinance doesn’t change them, so they don’t belong in the comparison.
The worked example — the trap, live
Current: $300,000 balance at 7%, 25 years left, payment $2,120.34. Offer: 5.75% for 30 years, $6,000 closing costs paid upfront.
| Keep | Refinance | |
|---|---|---|
| Monthly payment | $2,120.34 | $1,750.72 |
| Monthly change | — | −$369.62 |
| Break-even | — | Month 17 |
| Total cost over the loans’ lives | $636,101 | $636,259 |
| Lifetime result | — | $157 worse |
A $370 lower payment that costs you money: the new 30-year term stretches the debt five years longer than the 25 you had left. Now change only the new term to 25 years in the calculator and the same rate becomes a genuine five-figure saving — term is the lever nobody advertises.
For contrast, a clean win: $250,000 at 6.75% with 28 years left, refinanced to 6% over 30 years with $7,500 of costs rolled into the loan — payment down $114 a month and $1,327 saved over the life of the loans, with nothing due at closing.
FAQs
What is a good break-even point for a refinance? The break-even only matters against how long you’ll keep the loan. Under ~2 years is comfortable for most homeowners; beyond 3 years, you’re betting on not moving, not refinancing again, and rates not tempting you twice. Always check the lifetime line too — break-even alone blessed the trap in the example above.
Should I roll closing costs into the loan? “No-cost” refinances aren’t free — the costs are either in the loan balance (you pay interest on them for decades) or in a higher rate. Rolling in preserves your cash and the savings start immediately, but the lifetime benefit is thinner. Toggle the checkbox and compare both ways with your real figures.
Why does my payment drop but my total cost rise? Because total cost = payment × months. Restarting the clock to 30 years adds months faster than the lower rate removes dollars — especially mid-loan, when your current payments are finally mostly principal.
Should I refinance into a shorter term instead? Often the best move on this page: a 15- or 20-year term usually carries a lower rate and kills the term-restart problem, at the price of a higher payment. Run it — the lifetime savings line will tell you by how much.
Educational content only — not financial advice and not a loan offer. Figures are estimates from the inputs entered; your Loan Estimate governs the real transaction. Your numbers never leave your browser.
Sources: CFPB: no-cost or no-closing-cost refinancing, FRED MORTGAGE30US (Freddie Mac 30-year average) Figures last verified Report a wrong number