Refinance Calculator

Q: Is it worth refinancing for less than a 1% rate drop?

Often, yes — especially on larger loan balances. The old wait-for-a-1%-drop rule is outdated. Even a 0.25–0.5% drop can clear the break-even point well within a typical stay.

Find out exactly how much refinancing saves you — and how long it takes to break even on closing costs.

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Your Current Loan

Loan Balance $

Current Rate %

Monthly Payment $

P&I only, not taxes/insurance

New Loan

New Rate %

New Term

Closing Costs % of bal

Years to Stay 5 yrs

Your Savings

Monthly Savings

Current Payment —
New Payment —
Closing Costs —
Breakeven Point —
Total Interest Saved —

When Does Refinancing Make Sense?

Refinancing replaces your existing mortgage with a new one — ideally at a lower interest rate. It makes financial sense when the monthly savings outweigh the closing costs within the time you plan to stay in the home.

The Breakeven Rule

Divide your closing costs by your monthly savings. If you plan to stay longer than that number of months, refinancing is worth it. For example: $5,600 in closing costs ÷ $200 monthly savings = 28 months to break even. If you're staying 5+ years, you come out ahead.

How Much of a Rate Drop Matters?

The old rule was "only refinance if you drop 1% or more." That's outdated. On larger loan balances, even a 0.25–0.5% drop can be worth refinancing for, since the dollar savings scale with your loan size rather than the percentage alone. The calculator above shows your exact numbers so you don't have to guess — enter your actual balance and current payment for the most accurate break-even estimate.

Cash-Out vs Rate-and-Term Refinance

A rate-and-term refi simply gets you a better rate or shorter term. A cash-out refi lets you take equity out of your home as cash (for renovations, debt payoff, etc.) — but increases your loan balance. This calculator focuses on rate-and-term refinancing.

The Hidden Cost of Resetting Your Amortization Clock

Refinancing doesn't just change your rate — it restarts your amortization schedule. If you're 8 years into a 30-year loan, your payments have already shifted mostly toward principal. Refinance into a new 30-year term and you're back near the start, where most of each payment is interest again. That's fine if the monthly savings and rate drop are worth it, but it can mean paying interest for longer in total even though your monthly payment is lower. To avoid this, consider refinancing into a shorter term (e.g. a 20-year loan) that roughly matches your remaining payoff timeline, or use the Amortization Calculator to compare your current schedule against a new one before deciding.

Costs to Watch

Closing costs typically run 2–3% of the loan amount. Some lenders offer "no-closing-cost" refis, which roll costs into the rate — convenient, but you'll pay more over time. Shop at least 3 lenders before deciding.

Refinance Calculator FAQ

How is the break-even point calculated? ▼

Divide your total closing costs by your monthly savings. The result is the number of months it takes for your savings to cover what you spent to refinance. If you plan to stay in the home longer than that, refinancing is generally worth it.

What's the difference between rate-and-term and cash-out refinancing? ▼

A rate-and-term refinance replaces your loan with a new one at a better rate or different term, without changing your balance beyond closing costs. A cash-out refinance increases your loan balance so you can pocket the difference in cash — useful for renovations or debt payoff, but it means paying interest on a larger balance.

Does refinancing reset my loan back to year one? ▼

Yes, unless you specifically choose a shorter term. A new 30-year refinance restarts your amortization schedule, meaning your early payments go mostly toward interest again — even though your monthly payment may be lower. Many refinancers choose a 15- or 20-year term to avoid stretching the payoff timeline back out.

Is it worth refinancing for less than a 1% rate drop? ▼

Often, yes — especially on larger loan balances. The old "wait for a 1% drop" rule is outdated. Run your exact numbers above; even a 0.25–0.5% drop can clear the break-even point well within a typical stay.

What closing costs should I expect on a refinance? ▼

Typically 2–3% of the loan balance, covering appraisal, title, origination, and recording fees. Some lenders offer "no-closing-cost" refinances that roll these fees into a slightly higher rate — convenient, but usually costs more over the life of the loan.