Should you refinance the mortgage?
The break-even is the month where cumulative monthly savings catch up to your closing costs. Beyond that month, every dollar saved is real.
Built and reviewed by Stephen Omukoko Okoth
Mathematical Economist · ex-Morgan Stanley FI · Equilar
Current loan
What you have now
New loan
What you'd refinance into
Verdict
$ 306 saved per month.
Fast break-even (2y 2m) — likely worth doing.
Break-even depends only on closing costs and monthly savings. Lifetime savings depend on how long you keep the loan — short-term moves rarely justify the closing costs.
Result
Side-by-side
Current monthly
$ 2,253
New monthly
$ 1,947
Monthly savings
$ 306
Break-even
2y 2m
Lifetime interest (current)
$ 410.1K
Lifetime interest (new + closing)
$ 318.9K
Common questions
Should I refinance?
Refinance if your break-even (closing costs ÷ monthly savings) is shorter than how long you'll keep the house. The classic rule-of-thumb is 'at least 0.75% rate drop' — but the actual answer depends on the loan size and closing costs.
What are typical closing costs?
Usually 2–5% of the loan amount. On a $400k refinance, expect $8–20k. Some lenders offer 'no-closing-cost' refis where the costs are baked into a slightly higher rate — the tool can model that by setting closing costs to 0 and adjusting the new rate up.
Does refinancing reset my term?
It typically resets to a new 15- or 30-year clock, which means more total interest paid even at a lower rate. Refinancing into the same remaining term (e.g., from 25 years left to a new 25-year loan) keeps the comparison fair.
What about cash-out refinancing?
Same break-even logic, but you pull equity out — so you owe more. Compare the cash-out rate to alternatives (HELOC, securities-backed loan). The calculator above models a rate-and-term refi only.