How the break-even point works
Break-even months = closing costs ÷ monthly savings. Example: a $280,000 balance at 7.25% with 27 years left costs about $1,972/month. Refinancing to 6.0% for 30 years drops it to roughly $1,679 — about $293/month saved. With $6,000 in closing costs, you break even in $6,000 ÷ $293 ≈ 21 months. Stay in the home longer than that and the refinance pays for itself.
The trap the monthly payment hides
Resetting a 27-year loan to a new 30-year term lowers the payment partly by stretching the debt back out, which can add interest over the loan's life even at a lower rate. That's why this calculator also compares total remaining interest on both loans. To capture the rate savings without the reset, refinance into a shorter term or keep paying your old payment amount on the new loan.
Rules of thumb
Refinancing usually starts to make sense when the new rate is at least 0.5–0.75% below your current one and you'll stay past the break-even point. Closing costs typically run 2–6% of the loan amount. Beware "no-cost" refinances — the costs are usually rolled into the balance or a higher rate, so run the numbers with the true cost either way.
How to use this calculator
From your current mortgage statement, enter the outstanding balance, your existing rate, and the years remaining. Then enter the new rate and total closing costs from a lender's loan estimate. The calculator shows both monthly payments, your monthly savings, the break-even month where those savings repay the closing costs, and the effect on total interest over the life of the loan. The key question it answers is simple: will you still own this home past the break-even point? If you plan to move in two years and break-even is 21 months out, it barely works; if you're staying a decade, a solid rate cut is almost always worth it. Compare loan balances, not just payments, whenever costs are rolled in.