Compare your current mortgage against a new loan to see your monthly savings and how long it takes to recover the closing costs.
Refinancing replaces your current mortgage with a new one — usually to get a lower interest rate, a shorter term, or to switch from an adjustable to a fixed rate. The key question is not just “is the new payment lower?” but “will I keep the loan long enough to recover the closing costs?” That is the break-even point this calculator shows: closing costs divided by monthly savings. If you break even in 24 months and plan to stay for ten years, refinancing is usually a clear win. If you might move in a year, you would lose money.
A lower monthly payment is not always cheaper overall. Stretching a remaining 20-year balance into a new 30-year loan cuts the payment but can increase total interest paid — you are borrowing for ten extra years. The “interest saved” figure above compares the remaining interest on your current loan against the full interest on the new one, so you can see the true cost. Often the sweet spot is refinancing to a lower rate without extending the term, for example moving from 30 years remaining to a new 20-year loan.
In the UK this process is usually called remortgaging — switching to a new deal when your fixed term ends, often with a different lender. The maths is identical, but watch for early repayment charges on your current deal and arrangement fees on the new one; include both in the closing costs field.
It is the number of months of lower payments needed to recover what you paid in closing costs. Divide closing costs by monthly savings — if the answer is 30 months, you need to keep the loan at least 30 months to come out ahead.
Typically 2–5% of the loan amount in the US, covering origination, appraisal, title and recording fees. Some lenders offer ‘no-closing-cost’ refinances, but they usually bake the cost into a slightly higher rate.
Expect a small, temporary dip from the hard inquiry and new account. For most borrowers the effect fades within a few months, especially as on-time payments accumulate.
It is harder and the rate will be higher, but government-backed options (FHA, VA, USDA streamline refinances in the US) have more flexible requirements.
Often yes — on a large balance, one percentage point can save hundreds per month. Run the numbers above: if the break-even is well within how long you will keep the home, it is usually worth it.
Refinancing makes sense when you will keep the loan long enough to recover the costs. Enter your current balance, rate and years remaining, then the new rate, term and closing costs. If the break-even point above is comfortably shorter than how long you plan to stay — say 18 months against 8 years — refinancing is usually a win. Also check ‘interest saved over life of loan’: if the new payment is lower only because the term got longer, you could still pay more interest overall.