Find out if refinancing your mortgage is worth it. Calculate your break-even point, monthly savings, and total interest reduction. See the types of refinancing and whether you qualify.
Key metrics for evaluating a mortgage refinance decision
Enter your current loan details and new rate to see your monthly savings, break-even timeline, and total interest reduction over the life of the loan.
Open Mortgage Calculator →Mortgage refinancing replaces your existing home loan with a new one — ideally at a better interest rate, different term, or to access home equity. The decision to refinance should always be based on a break-even calculation, not just the appeal of a lower monthly payment.
Refinancing makes financial sense when: (1) You can reduce your interest rate by 0.5–1.0% or more. (2) Your break-even period is shorter than your planned time in the home. (3) You want to switch from an adjustable-rate mortgage (ARM) to a fixed rate before your adjustment date. (4) You want to shorten your term from 30 to 15 years to save dramatically on interest. (5) You need to access home equity for major expenses at a lower rate than credit cards or personal loans.
The break-even point is the most important number in any refinance decision. Formula: Break-even months = Total closing costs ÷ Monthly payment savings.
Example: Your current payment is $2,100/month. After refinancing, your new payment would be $1,900/month — saving $200/month. Closing costs are $6,000. Break-even = $6,000 ÷ $200 = 30 months (2.5 years). If you plan to stay in the home more than 30 months, refinancing saves money. If you plan to sell or move in 2 years, you'll pay $6,000 in closing costs and not recoup it in savings.
Some lenders offer "no-cost" refinances where closing costs are rolled into the loan or compensated by a slightly higher rate. These eliminate the break-even concern but result in more total interest paid over the loan life.
The most common type — you replace your current mortgage with a new one at a lower rate, shorter term, or both. Your loan balance stays approximately the same. The goal is to reduce monthly payments, save on total interest, or pay off the loan faster. This is the right move when mortgage rates have dropped 0.5–1.0%+ below your current rate and your break-even is under 3–4 years.
You take out a new mortgage larger than your current balance and receive the difference in cash. Example: You owe $200,000 on a home worth $350,000. A cash-out refinance at 80% LTV would give you a new mortgage of $280,000 — with $80,000 in cash (minus closing costs). Cash-out refis are commonly used for home improvements, debt consolidation, college funding, or major purchases. Rates are slightly higher than rate-and-term refis, but typically much lower than personal loans or credit cards.
Streamline refinances are simplified refinancing programs for FHA and VA loan holders. They require minimal documentation, no income verification in most cases, and often no appraisal. FHA Streamline Refinance allows FHA borrowers to quickly reduce their rate without extensive underwriting. VA Interest Rate Reduction Refinance Loan (IRRRL) is similar for VA loan holders. Both require that you're current on your mortgage and that the refinance provides a tangible benefit (lower rate or payment).
Refinancing costs typically run 2–5% of the loan amount. On a $300,000 refinance, expect $6,000–$15,000 in closing costs including appraisal ($400–$700), origination fees (0.5–1% of loan), title insurance, recording fees, and prepaid interest. Eligibility for the best refinance rates requires a credit score of 740+, at least 20% home equity (to avoid PMI), stable income, and a debt-to-income ratio under 43%. FHA and VA streamlines have more lenient requirements — no minimum credit score for FHA Streamline in most cases.
Break-even months = Closing costs ÷ Monthly payment savings. Example: $6,000 closing costs ÷ $200/month savings = 30 months. Stay in the home longer than 30 months and you save money. Planning to move sooner? The refinance costs more than it saves. This is the single most important number to calculate before refinancing.
Refinance when you can drop the rate by 0.5–1.0%+, the break-even is shorter than your planned stay, you want to escape an ARM before adjustment, you want to shorten the loan term, or you need to access home equity at a low rate. Don't refinance just for lower payments if it extends your term significantly.
Rate-and-term: same balance, new rate or term — goal is lower payments or faster payoff. Cash-out: larger new mortgage, you receive the difference in cash. Cash-out lets you access home equity for home improvements, debt consolidation, or major expenses. Rates are slightly higher than rate-and-term but lower than personal loans or credit cards.
Conventional refi: 620 minimum, best rates at 740+. Cash-out refi: typically 640–680+. Equity: 5% minimum, 20% to avoid PMI. FHA/VA streamlines: more lenient — often no minimum credit score. Cash-out refis capped at 80% LTV (must keep 20% equity in the home).