Find out how many months until a refinance pays for itself
| Cost Item | Typical Amount |
|---|---|
| Loan origination fee | 0.5% – 1% of loan amount |
| Appraisal | $300 – $600 |
| Title search + title insurance | $700 – $1,000 |
| Credit report | $25 – $50 |
| Recording fees | $25 – $250 |
| Discount points (optional) | 1% of loan per point |
| Closing Costs | $100/mo saved | $200/mo saved | $300/mo saved | $400/mo saved |
|---|---|---|---|---|
| $3,000 | 30 months | 15 months | 10 months | 8 months |
| $6,000 | 60 months | 30 months | 20 months | 15 months |
| $9,000 | 90 months | 45 months | 30 months | 23 months |
Refinancing swaps your current mortgage for a new one, usually to grab a lower rate. The catch is that it isn't free. Between origination fees, the appraisal, and title work, closing costs typically run 2% to 6% of the loan. This calculator tells you how long it takes for your monthly savings to pay back those costs, which is the single most useful number when you're deciding whether a refi makes sense.
Both payments come from the standard amortization formula: M = P × (r/12) ÷ (1 − (1 + r/12)−n), where P is the loan balance, r is the annual rate as a decimal, and n is the number of monthly payments. From there, break-even months = closing costs ÷ (current payment − new payment), rounded up to the next whole month.
Enter your current balance, rate, and the years you have left, then the rate and term you've been quoted along with estimated closing costs. Everything updates as you type. Watch two numbers: the break-even point, and the lifetime savings figure at the bottom of the results. A refi can look great month to month and still cost you money over the full term if it stretches out your payoff date.
Say you owe $300,000 at 7.5% with 25 years left. That's a payment of $2,217 a month. Refinance the same $300,000 into a 30-year loan at 6.25% and the payment drops to $1,847, saving you $370 a month. With $6,000 in closing costs, you break even in 17 months ($6,000 ÷ $370 = 16.2, rounded up to 17).
Here's the twist. Interest remaining on the old loan is $365,092, while the new loan racks up $364,975 over its full 30 years. Nearly identical, because you added five years of payments. After closing costs, this particular refi actually costs $5,883 over its lifetime. Great for monthly cash flow, not for total cost. Choosing a 25-year or shorter term instead flips that math in your favor.
As a rule of thumb, refinancing makes sense when you can cut your rate by at least 0.75 to 1 percentage point and you'll stay in the home past the break-even point. If you break even in 17 months and plan to stay five years, you come out ahead. Also weigh the term reset, since a fresh 30-year clock adds interest.
Divide your total closing costs by your monthly payment savings. If refinancing costs $6,000 and drops your payment by $370 a month, you break even in about 17 months ($6,000 ÷ $370 = 16.2, rounded up). After that point, every month of savings is money you actually keep.
Most refinances run 2% to 6% of the loan amount. Typical line items include loan origination (0.5% to 1% of the loan), an appraisal ($300 to $600), title search and insurance ($700 to $1,000), a credit report ($25 to $50), and recording fees ($25 to $250). Discount points are optional and cost 1% of the loan each.
Yes, unless you pick a shorter term. Swapping 25 remaining years for a new 30-year loan lowers the payment but stretches interest over five extra years, which can wipe out lifetime savings. If lifetime cost matters more than monthly cash flow, refinance into a 25, 20, or 15-year term instead.
It can be, if you'll stay long enough. At $100 a month, $6,000 in closing costs takes 60 months, five full years, to recover. Sell or refinance again before then and you lose money on the deal. The bigger the monthly savings relative to costs, the safer the refi.