For a comprehensive guide to when refinancing makes sense, break-even analysis, and the refinance process, see the Mortgage Refinancing hub.
Determine if refinancing your mortgage will save you money.
Quick Refinance Analysis
Step 1: Calculate Monthly Savings
| Your Current Loan | Your New Loan |
|---|---|
| Remaining balance: $_____ | Same balance |
| Current rate: ____% | New rate: ____% |
| Current payment: $_____ | New payment: $_____ |
| Monthly savings | $_____ |
Step 2: Calculate Break-Even
Break-Even = Closing Costs ÷ Monthly Savings
| Closing Costs | Monthly Savings | Break-Even |
|---|---|---|
| $3,000 | $150 | 20 months |
| $4,000 | $150 | 27 months |
| $5,000 | $200 | 25 months |
| $6,000 | $200 | 30 months |
| $8,000 | $300 | 27 months |
| $10,000 | $400 | 25 months |
Refinance Savings Examples
Example 1: Rate Drop of 1%
Current: $300,000 at 7.50%, 27 years remaining
| Scenario | Current | Refinance @ 6.50% |
|---|---|---|
| Rate | 7.50% | 6.50% |
| Monthly payment | $2,098 | $1,896 |
| Monthly savings | — | $202 |
| Closing costs | — | $6,000 |
| Break-even | — | 30 months |
If staying 30+ months: Refinance makes sense
Example 2: Rate Drop of 0.5%
Current: $350,000 at 7.25%, 25 years remaining
| Scenario | Current | Refinance @ 6.75% |
|---|---|---|
| Rate | 7.25% | 6.75% |
| Monthly payment | $2,387 | $2,269 |
| Monthly savings | — | $118 |
| Closing costs | — | $6,500 |
| Break-even | — | 55 months |
If staying 55+ months: Worth considering
Example 3: Shortening Term
Current: $250,000 at 7.00%, 30-year, 25 years remaining
| Scenario | Current 30-yr | New 15-yr @ 6.25% |
|---|---|---|
| Rate | 7.00% | 6.25% |
| Monthly payment | $1,663 | $2,142 |
| Total interest remaining | $248,900 | $135,570 |
| Interest savings | — | $113,330 |
| Payoff | 25 years | 15 years |
Higher payment but massive long-term savings
Payment Comparison Tables
$200,000 Balance
| Rate | 30-Year | 20-Year | 15-Year |
|---|---|---|---|
| 6.00% | $1,199 | $1,432 | $1,688 |
| 6.50% | $1,264 | $1,491 | $1,742 |
| 7.00% | $1,331 | $1,551 | $1,798 |
| 7.50% | $1,398 | $1,611 | $1,854 |
| 8.00% | $1,468 | $1,673 | $1,911 |
$300,000 Balance
| Rate | 30-Year | 20-Year | 15-Year |
|---|---|---|---|
| 6.00% | $1,799 | $2,149 | $2,532 |
| 6.50% | $1,896 | $2,236 | $2,613 |
| 7.00% | $1,996 | $2,326 | $2,696 |
| 7.50% | $2,098 | $2,417 | $2,781 |
| 8.00% | $2,201 | $2,509 | $2,867 |
$400,000 Balance
| Rate | 30-Year | 20-Year | 15-Year |
|---|---|---|---|
| 6.00% | $2,398 | $2,865 | $3,375 |
| 6.50% | $2,528 | $2,981 | $3,484 |
| 7.00% | $2,661 | $3,101 | $3,595 |
| 7.50% | $2,797 | $3,223 | $3,708 |
| 8.00% | $2,935 | $3,346 | $3,823 |
Total Interest Comparison
$300,000 Loan: 30-Year vs 15-Year
| Rate | 30-Year Interest | 15-Year Interest | Savings |
|---|---|---|---|
| 6.00% | $347,515 | $155,683 | $191,832 |
| 6.50% | $382,633 | $170,319 | $212,314 |
| 7.00% | $418,527 | $185,302 | $233,225 |
| 7.50% | $455,169 | $200,625 | $254,544 |
Break-Even Calculator
Quick Break-Even Chart
| Closing Costs | Monthly Savings Needed to Break Even in: |
|---|---|
| 12 mo | |
| $3,000 | $250 |
| $4,500 | $375 |
| $6,000 | $500 |
| $8,000 | $667 |
| $10,000 | $833 |
When Refinancing Makes Sense
Good Reasons to Refinance
| Situation | Benefit |
|---|---|
| Rate dropped 0.75%+ | Lower payments & interest |
| Shorter term available | Pay off faster |
| Remove PMI | Eliminate insurance premium |
| ARM to fixed | Rate stability |
| Cash-out for home improvement | May be tax-deductible |
Think Twice About Refinancing
| Situation | Why |
|---|---|
| Rate drop < 0.5% | May not offset costs |
| Moving in 1-2 years | Won’t break even |
| Resetting to 30 years | Extends payoff date |
| High closing costs | Longer break-even |
Costs to Factor In
| Cost | Typical Range |
|---|---|
| Origination fee | 0.5-1% of loan |
| Appraisal | $400-$700 |
| Title insurance | $500-$1,500 |
| Other closing costs | $1,000-$3,000 |
| Total typical | 2-5% of loan |
No-Closing-Cost Option
| Feature | Standard Refinance | No Closing Cost |
|---|---|---|
| Closing costs | $6,000 paid upfront | $0 upfront |
| Interest rate | 6.50% | 6.875% |
| Monthly payment | $1,896 | $1,970 |
| Better if staying | 4+ years | Under 3 years |
Refinance Decision Flowchart
-
Rate difference 0.75%+?
- Yes → Continue
- No → Probably not worth it
-
Planning to stay past break-even?
- Yes → Continue
- No → Consider no-cost refinance or skip
-
Can afford closing costs?
- Yes → Standard refinance
- No → Roll into loan or no-cost option
-
Resetting term significantly?
- No → Good to proceed
- Yes, but much lower rate → May still save
- Yes, similar rate → Reconsider
Total Cost Comparison
$300,000 current balance, choice to refinance or not:
Keep Current (7.50%, 25 years left)
| Item | Amount |
|---|---|
| Monthly payment | $2,223 |
| Total remaining payments | $666,900 |
| Total interest remaining | $366,900 |
Refinance (6.50%, new 30-year)
| Item | Amount |
|---|---|
| Monthly payment | $1,896 |
| Total remaining payments | $682,560 |
| Total interest | $382,560 |
| Closing costs | $6,000 |
| Total cost | $688,560 |
Lower payment but higher total cost (resetting to 30 years)
Refinance (6.50%, 20-year term)
| Item | Amount |
|---|---|
| Monthly payment | $2,236 |
| Total remaining payments | $536,640 |
| Total interest | $236,640 |
| Closing costs | $6,000 |
| Total cost | $542,640 |
Lower total cost, similar payment, done sooner
Related: Cost to Refinance | Refinance Rates | Mortgage Payment Calculator
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