How to use this refinance calculator
- Describe your current loan. Enter the balance and time left from your latest mortgage statement, or switch to “Original loan” and enter what you borrowed, the term and how many years you have paid; the calculator estimates your balance.
- Enter your current rate and the new rate. The new rate starts at Freddie Mac’s average 30-year fixed rate, 7.03% for the week ending September 24, 2026; your own quote depends on your credit, home equity and any points.
- Pick the new term and add closing costs. Open “Points, cash out & rolling in costs” to add discount points, take cash out or finance the costs.
- Read the verdict. You get the break-even month, the lifetime savings after costs and what you would save if you sold or paid off the loan after a few years. Copy the link to save or share your scenario.
How to calculate your refinance break-even point
The break-even point is how many months of lower payments it takes to repay what the refinance cost you:
N = C ÷ (M_current − M_new)
- N
- months to break even (round up)
- C
- total refinance costs: closing costs plus points
- M_current
- current monthly principal and interest
- M_new
- new monthly principal and interest
Worked example
Each payment comes from the standard formula M = P × r(1 + r)n ÷ [(1 + r)n − 1] (see our mortgage calculator). A $300,000 balance at 8% with 324 payments left costs $2,262.84 a month. A new 30-year loan for the same $300,000 at 7.03% costs $2,001.96, a drop of $260.88. With $9,000 in closing costs, N = $9,000 ÷ $260.88 = 34.5, so you are ahead after 35 months.
The quick check has limits. Freddie Mac notes that it doesn’t work for cash-out refinances or when you shorten your term. It also flatters a refinance that stretches your payoff, because part of the lower payment is just slower repayment. A stricter test compares the interest you save with the costs: in this example that takes 39 months, 4 months longer. The calculator shows both and uses the interest test automatically when your payment goes up or you take cash out.
When is refinancing worth it?
Two questions settle most decisions:
- Will you keep the new loan past the break-even point? If you might move in two years but need three to recoup the costs, Freddie Mac says refinancing probably doesn’t make financial sense.
- Do you still come out ahead over the whole loan? A lower payment is not the same as saving money. Check the lifetime result after costs, and the “Savings if you sell or pay off after…” table for the years you actually expect to keep the loan.
How big a rate cut you need depends on your costs. The table shows months to break even when a 30-year loan at 8% is refinanced into a new 30-year loan, with closing costs as a share of the balance. Because costs and savings both scale with the balance, the months are the same for any loan size.
| Rate cut (percentage points) | Savings per $100k / mo | 2% costs | 3% costs | 4% costs | 5% costs | 6% costs |
|---|---|---|---|---|---|---|
| 0.25 (to 7.75%) | $17.35 | 116 mo | 173 mo | 231 mo | 289 mo | 346 mo |
| 0.5 (to 7.5%) | $34.55 | 58 mo | 87 mo | 116 mo | 145 mo | 174 mo |
| 0.75 (to 7.25%) | $51.59 | 39 mo | 59 mo | 78 mo | 97 mo | 117 mo |
| 1 (to 7%) | $68.46 | 30 mo | 44 mo | 59 mo | 74 mo | 88 mo |
| 1.5 (to 6.5%) | $101.70 | 20 mo | 30 mo | 40 mo | 50 mo | 59 mo |
| 2 (to 6%) | $134.21 | 15 mo | 23 mo | 30 mo | 38 mo | 45 mo |
Freddie Mac says refinancing typically costs 3% to 6% of the loan principal, which is $9,000 to $18,000 on a $300,000 balance. Shop around: the CFPB explains that mortgage credit checks within a 45-day window count as a single inquiry on your credit report.
Does refinancing restart your 30-year mortgage?
Yes. A refinance replaces your mortgage with a new loan, and a new 30-year term starts the countdown again. In the example you have 27 years left, so a new 30-year loan adds 3 years of payments. That is why the 30-year refinance cuts the payment the most but saves only $3,456 over its life: the extra years of interest eat most of the rate savings. Here is the same $300,000 balance at 7.03% on different schedules, after $9,000 in costs:
| Option | Monthly payment | Paid off in | Total interest | Net savings after costs |
|---|---|---|---|---|
| Keep current loan (8%) | $2,262.84 | 27 years | $433,160 | — |
| New 30-year loan | $2,001.96 | 30 years | $420,704 | $3,456 |
| New 30-year loan, paying $2,069 a month | $2,069.32 | 27 years | $370,458 | $53,702 |
| New 20-year loan | $2,331.30 | 20 years | $259,513 | $164,648 |
| New 15-year loan | $2,701.52 | 15 years | $186,273 | $237,887 |
Paying $2,069 a month on the new 30-year loan keeps your original payoff date and changes the lifetime result to net savings of $53,702, while leaving the lower required payment as a safety net. Shorter terms save far more interest but raise the payment. They also tend to carry lower rates: Freddie Mac’s averages for the week ending September 24, 2026 were 6.42% for 15-year and 7.03% for 30-year loans, which would widen the gap. This table uses one rate for every term to isolate the effect of the term. Our amortization calculator shows the month-by-month effect of extra payments.
Rate-and-term vs. cash-out refinance
A rate-and-term (no cash-out) refinance replaces the unpaid balance to get a lower rate, a different term or a switch from an adjustable to a fixed rate. Freddie Mac calls it the most common option. Fannie Mae calls it a “limited cash-out” refinance and caps any cash back to you at the greater of 1% of the new loan amount or $2,000 (Selling Guide B2-1.3-02).
A cash-out refinance borrows more than you owe and pays you the difference. Freddie Mac notes these loans generally have a slightly higher rate. In our example, taking $50,000 out at the same 7.03% makes the new loan $350,000 and the payment $2,335.61, which is $333.66 more than a rate-and-term refinance, and the cash costs $70,117 in interest over 30 years. The payment break-even doesn’t apply here; compare that cost with other ways to borrow, such as a home equity loan or a personal loan (try our loan calculator).
Is a no-closing-cost refinance worth it?
Freddie Mac warns that there is no such thing as a free loan: a “no-cost” refinance usually means a higher rate, the costs added to your balance, or both.
- Costs rolled into the loan. Financing the $9,000 in the example raises the payment by $60.06 a month and adds $12,621 of interest over 30 years.
- Lender credits. The CFPB explains that you accept a higher rate and the lender pays some or all of your closing costs. Suppose a lender covered the full $9,000 for a rate 0.25 point higher (7.28%; real pricing varies). Paying the costs yourself only pulls ahead after 143 months (11 years 11 months). If you expect to sell or refinance again before then, the no-cost option is cheaper.
Should you pay points when you refinance?
A discount point costs 1% of the loan amount and lowers your rate compared with a zero-point loan from the same lender. Points have their own break-even: the cost divided by the monthly savings from the lower rate. On the example loan, one point costs $3,000. If it lowered the rate by 0.25 point to 6.78% (ask lenders for their actual pricing), the payment would fall by $50.17 and the point would pay for itself after 60 months (5 years). Points make sense only if you are confident you will keep the loan well beyond that.
Taxes: the IRS says points paid to refinance are generally deducted ratably over the term of the loan rather than all in the year you pay them. Publication 936 covers the exceptions, such as the share of points tied to substantial improvements to your main home.
Frequently asked questions
Is it worth refinancing to lower my rate by 1%?
It often is, as long as you keep the new loan for several years. On a 30-year loan at 8%, a rate cut of 1 percentage point lowers the payment by about $68 for every $100,000 borrowed, so closing costs of 3% of the balance are recovered in about 44 months and 5% in about 74 months. A half-point cut (0.5 percentage point) takes about 87 months at 3% costs. There is no universal threshold: compare the break-even with how long you expect to keep the loan.
How do you calculate the break-even point on a refinance?
Divide the total cost of the refinance by your monthly savings. For example, $9,000 in closing costs divided by a $260.88 drop in the monthly payment is 34.5, so you break even after 35 months. Freddie Mac notes this quick check does not work for cash-out refinances or when you shorten your term; in those cases compare the interest you save with the costs instead.
How much does it cost to refinance a mortgage?
Freddie Mac says to expect 3% to 6% of your loan principal, or $9,000 to $18,000 on a $300,000 balance. Costs include lender origination and underwriting fees, the appraisal, credit report, title services, government recording fees and sometimes survey and attorney fees. Discount points are extra. Your lender, credit score and location drive the total, so compare Loan Estimates from several lenders.
Does refinancing reset my mortgage term?
Yes. A refinance is a new loan, so a new 30-year term starts the clock again. With 27 years left, refinancing into a 30-year loan adds 3 years of payments. You can avoid that by paying $2,069.32 a month on the new loan, which in our example keeps your original payoff date and changes the lifetime result from net savings of $3,456 to net savings of $53,702. Or choose a shorter term.
Can you roll closing costs into a refinance?
Usually, yes: the costs are added to the new loan instead of paid in cash. You pay interest on them for the life of the loan. In our example, rolling $9,000 into a $300,000 refinance at 7.03% raises the payment by $60.06 a month and adds $12,621 of interest over 30 years. Tick “Roll closing costs into the new loan” in the calculator to see the effect on your numbers.
Are points on a refinance tax-deductible?
Generally yes, but not all at once. The IRS says points paid to refinance a mortgage are deducted ratably over the term of the loan, while points on a loan to buy your main home can often be deducted in the year paid. If part of a refinance pays for substantial improvements to your main home, that share of the points may be deductible right away. You only benefit if you itemize deductions.
Will shopping for a refinance hurt my credit score?
Shopping carefully has little effect. According to the Consumer Financial Protection Bureau, multiple credit checks from mortgage lenders within a 45-day window are recorded on your credit report as a single inquiry. That lets you collect and compare Loan Estimates from several lenders without the checks adding up, so do your rate shopping within a short period.