How much lower should the rate be to refinance?

There's no fixed threshold. What matters is whether you'll stay past the break-even point and whether resetting the term raises your total interest.

What is a cash-out refinance?

A new loan for more than you owe, with the difference paid to you in cash. It turns home equity into cash but raises your balance and usually your payment. Lenders cap how much equity you can take out, and limits vary by loan program.

Should I roll closing costs into the new loan?

It saves cash today, but you'll pay interest on those costs for the life of the loan. Paying them at closing keeps the balance lower. Enter both options here to compare the payment and total interest.

Does refinancing restart my loan term?

Yes, the new loan has its own term. Choosing a term close to the years left on your current loan, or making extra principal payments, keeps you from stretching out your payoff date.

Financing & closing

Refinance Calculator

A lower rate only pays if you keep the loan long enough to recover the closing costs. Compare your current loan with a new one to see the change in payment, the break-even month and the difference in total interest over each loan's remaining life.

Monthly savings

$293

$1,972 now → $1,679 after

You'd recover the closing costs in 1 yr 7 mo. It also lowers your total interest.

New loan amount: $280,000
Interest left on current loan: $358,845
Interest on new loan: $324,347
Lifetime difference (after costs): $28,998

Net savings over time

How the refinance is compared

The formula

Monthly payment (each loan)

M = P × r(1 + r)ⁿ(1 + r)ⁿ − 1

P: Your current balance for the current loan, or the new loan amount
r: That loan's annual rate ÷ 12, as a decimal
n: Months left on the current loan, or the new term in years × 12

New loan amount

New loan = Current balance + Cash out + Rolled-in closing costs

Rolled-in closing costs: Closing costs added to the loan; $0 if you pay them at closing

Monthly savings

Monthly savings = Current payment − New payment

Break-even point

Break-even months = Closing costsMonthly savings

Closing costs: The refinance's total closing costs, whether paid upfront or rolled in

Lifetime interest difference

Difference = Current loan's remaining interest − New loan's total interest − Closing costs paid upfront

Both payments use the standard fixed-rate amortization math: your current loan on its balance, rate and remaining term, and the new loan on its amount, rate and term. The new loan can be larger than your balance if you take cash out or add the closing costs to it instead of paying them at closing.

The break-even point is how many months of lower payments it takes to recover the closing costs. If you expect to sell or refinance again before then, the new loan likely costs more than it saves.

The lifetime comparison sets the interest left on your current loan against the full interest on the new one, less any closing costs you pay upfront. Starting a fresh 30-year term can lower the payment but raise the total interest, so a lower payment alone doesn't mean the refinance saves money. Rates and fees depend on your credit, equity and lender.

Results are estimates for planning, not a loan offer or financial advice. Lenders, title companies and local rules set the actual figures.

Terms used in this calculator

RefinanceMortgages & financingTo refinance is to replace an existing mortgage with a new one, usually to get a lower rate, change the loan term, or take cash out of the home's equity.AmortizationMortgages & financingAmortization is the process of paying off a loan with regular, fixed payments over time. Early payments go mostly to interest; later payments go mostly to principal.Home EquityMortgages & financingHome equity is the portion of a property you own outright: its current market value minus everything owed on it. It grows as you pay down the loan and as the home's value rises.Loan-to-Value Ratio (LTV)Mortgages & financingLoan-to-value ratio (LTV) compares the size of a mortgage with the property's value. A lower LTV means more equity and less risk for the lender, which often brings better loan terms.Closing CostsBuying & closingClosing costs are the fees and prepaid expenses paid to complete a real estate purchase, beyond the price and down payment. Buyers typically pay about 2% to 5% of the loan or purchase price.MortgageMortgages & financingA mortgage is a loan used to buy real estate, secured by the property itself. If the borrower stops paying, the lender can take the property through foreclosure to recover what is owed.Private Mortgage Insurance (PMI)Mortgages & financingPrivate mortgage insurance (PMI) protects the lender, not the borrower, if a borrower defaults on a conventional loan. It is usually required when the down payment is less than 20% of the home's value.AppraisalBuying & closingAn appraisal is a licensed appraiser's independent estimate of a property's market value. Lenders require one to make sure the home is worth at least the amount being borrowed.

Frequently Asked Questions

Guides to read next

Closing Costs Explained: What Buyers Pay and WhyGuide · 9 min readClosing costs are the fees and prepaid expenses due when a purchase completes, on top of the down payment. They vary by state, loan and price, and some are negotiable. This guide explains each category, how to read your disclosures and how to keep costs down.Inspection, Appraisal and Underwriting: Clearing Contingencies Before ClosingGuide · 7 min readOnce your offer is accepted, a short window opens to check the home's condition, its value and your loan. This guide explains how the inspection, appraisal, underwriting and title review run side by side, and how to clear each contingency before its deadline.How to Finance a Foreclosure or Distressed PropertyGuide · 7 min readDistressed properties are harder to finance than move-in-ready homes. Condition, timing and the seller's terms all limit which loans will work. This guide matches financing options to each kind of distressed purchase and explains the trade-offs.

More calculators

Mortgage CalculatorMonthly payment with taxes, insurance, PMI and an amortization schedule.Closing Cost CalculatorLine-by-line closing costs and cash needed at closing.Debt-to-Income Ratio CalculatorFront-end and back-end DTI, the way lenders measure it.

Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.