Is your lender's refinance pitch actually saving you money?
Banks love to push refinancing — but when does it actually pay off? Find your exact break-even month.
Current Loan
25 yr
New Loan
30 yr
Typical: 2-5% of loan
Roll closing costs into loan?
7 yr
New payment
$1,342
Monthly savings
$238
Break-even
1.5 yr
Savings over 7 yr
$15,488
Lifetime savings
$13,638
Break-Even Timeline
The moment cumulative savings cross zero is when refinancing pays for itself.
Total Cost Comparison
Keep Current Loan
Total payments$474,000
Total interest$304,888
Refinance
Total payments$487,638
Total interest$233,141
Closing costs$4,500
How It Works
Refinancing costs money upfront (closing costs) but saves money monthly (lower payment). The break-even point is when your cumulative monthly savings equal the upfront cost.
The formula: Break-even months = Closing costs ÷ Monthly savings. We also calculate total interest on both loans to show lifetime impact, accounting for the fact that a new 30-year term means paying interest longer.
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Frequently Asked Questions
What are typical refinance closing costs?
Closing costs typically range from 2-5% of the loan amount. On a $250,000 loan, expect $5,000-$12,500. This includes appraisal, title insurance, origination fees, and more. Some lenders offer 'no-closing-cost' refinances where costs are rolled into a slightly higher rate.
Should I roll closing costs into the loan?
Rolling closing costs into the loan means you don't pay upfront, but you'll pay interest on those costs over the life of the loan. It's better if you're unsure how long you'll stay. Paying upfront gives a faster break-even if you stay long enough.
When does refinancing make sense?
A common rule of thumb is to refinance if you can lower your rate by at least 0.5-1% and plan to stay past the break-even point. But the real answer depends on your specific closing costs, rate drop, and timeline - which is exactly what this calculator shows you. Read our detailed guides at /guides/when-refinancing-makes-sense and /guides/is-it-worth-refinancing-for-1-percent.
Does refinancing restart my 30-year clock?
Yes, if you refinance into a new 30-year loan. You can mitigate this by choosing a 15 or 20-year term, or by continuing to make your old (higher) payment on the new loan. This calculator lets you compare different term lengths.