Does refinancing actually save me money?
Refinance break-even
There are only two questions worth asking about a refinance. How many months does it take for the monthly saving to repay the cost of getting it, and will you still own the house then?
This calculator answers both, and it does something most refinance calculators avoid: it compares against the remaining term on your current loan rather than a fresh thirty years. That is the honest comparison, and sometimes it shows that a lower payment costs more.
The loan you have
27 years, 0 months left
The loan you are considering
Leave at zero for a rate-and-term refinance
Financed or paid — either way it is the cost to recover
Break-even
18 months
You recover the $4,800 cost after about 18 months. Past that point the saving is yours; before it, you are behind.
- Payment now (P&I)
- $1,984
- New payment (P&I)
- $1,709
- Monthly difference
- −$275
- New loan amount
- $285,000
Total interest and cost, both loans held to term
Refinancing saves roughly $22,733 over the life of the loan at these terms.
An estimate for comparison only, using principal and interest. It does not include taxes, insurance, mortgage insurance changes or the tax treatment of interest. This is not a commitment to lend and not a rate quote.
Get a refinance quote
Send me your current statement and I will tell you honestly whether it is worth doing — including when the answer is no, or not yet.
What it accounts for
- Your current balance, rate, original term and how many payments you have already made
- The rate and term you are considering
- Closing costs — whether you pay them or finance them, they are the cost to recover
- Any cash you want to take out, which raises the balance and changes the arithmetic
What it cannot know
- Principal and interest only. Refinancing can also remove mortgage insurance, which is a saving this calculation does not show.
- It does not model the tax treatment of mortgage interest. Ask your accountant.
- It assumes both loans are held to term, which most people do not do.
Questions
About this calculation
There is no universal threshold, and the old "one percent rule" is folklore. On a large balance a half point can pay for itself in under two years; on a small balance a full point might never. Run your own numbers.
No. Restarting a thirty-year term at a lower rate can reduce the payment and still increase total interest, because you extended the loan. This calculator shows both figures for exactly that reason.
Yes, and it is one of the better reasons to refinance — particularly out of an FHA loan, where mortgage insurance is usually permanent. Once you have 20 percent equity, a conventional refinance can remove it entirely.
Output is an estimate for illustration and planning only, based on the figures you enter. It is not an offer of credit, a rate quote or a commitment to lend, and mortgage insurance figures are illustrative rather than quoted premiums. This is not an offer to enter into an agreement or a commitment to lend. Not all applicants will qualify. Information and rates are subject to change without notice. All loans are subject to credit review and approval. Fairway Home Mortgage is a division of Fairway Independent Mortgage Corporation. NMLS Entity ID #2289.
Next step
Numbers you can actually make an offer with.
A pre-approval takes about 24 hours from a complete document set and costs nothing. It replaces every estimate here with a figure a listing agent will take seriously.