The break-even calculation
Divide your total refinance closing costs by your expected monthly savings. The result is the number of months until the refinance pays for itself. If you plan to keep the loan longer than that, the refinance may make financial sense.
Look beyond the monthly payment
- Resetting the term: a new 30-year loan on a mortgage you have paid for years can lower the payment but increase total interest. Consider a shorter new term.
- Financed costs: rolling closing costs into the balance means paying interest on them.
- Escrow refunds: your old servicer generally refunds the old escrow balance after payoff, which affects cash flow but not the cost of the loan.
Other good reasons to refinance
- Moving from an adjustable rate to a fixed rate.
- Removing mortgage insurance once you have enough equity.
- Removing a co-borrower after a divorce.
The break-even calculator on this site uses only the numbers you enter. Results are estimates only.
Keep reading
This page is general education. Program rules change; confirm current requirements with the official sources linked here and with a licensed lender.