The Core Refinance Math
Refinancing replaces your existing mortgage with a new one at different terms. The decision rests on three numbers: monthly payment difference, closing costs, and break-even period. If you stay in the home longer than the break-even period, refinancing saves money.
Break-Even Period = Total Closing Costs ÷ Monthly Payment Savings. Example: $6,000 in closing costs ÷ $180/month savings = 33 months (2.75 years) to break even. If you stay 5+ years, refinancing wins.
What to Enter in the Calculator
Refinance calculator inputs and where to find them
| Input | Where to Find It | Notes |
|---|---|---|
| Current loan balance | Most recent mortgage statement | Current payoff amount, not original loan |
| Current interest rate | Mortgage statement or loan docs | Your existing rate |
| Remaining loan term | Mortgage statement | Months remaining, not original term |
| New interest rate | Lender quote | Shop 3+ lenders |
| New loan term | Refinance offer | 15 or 30 years typically |
| Estimated closing costs | Lender Loan Estimate | Typically 2–5% of loan amount |
Real Example: Should Maria Refinance?
Maria has a $280,000 balance at 7.1%, 22 years remaining. Current payment: $1,985/month. New offer: 6.2% fixed, 30 years, $7,200 in closing costs. New payment: $1,714/month. Monthly savings: $271. Break-even: $7,200 ÷ $271 = 26.6 months (2.2 years). Maria plans to stay 8+ years. Refinancing makes strong sense.
The Refinance Pitfalls the Calculator Catches
- Resetting to 30 years: lower monthly payment but more total interest paid
- Rolling closing costs into the loan: feels free, costs more in interest
- Short remaining term: if you have 8 years left, a 30-year refi usually costs more total
- Moving soon: short break-even period doesn’t help if you sell before reaching it
A refinance that saves $200/month but resets to 30 years from 20 years remaining adds 10 years of payments. That 10-year extension often costs $80,000–$150,000 in additional interest — far more than the monthly savings. Always run total interest paid, not just monthly savings.
Calculate Your Refinance Break-Even
Enter your current loan and new rate — get your break-even and lifetime savings in seconds.