A lower rate is not automatically a win. This shows what restarting the clock costs.
Monthly saving
$283
Dropping from 7.25% to 6.25% cuts the payment from $2,253 to $1,970. Your $6,500 in closing costs is recovered after 1 year, 11 months. Since you expect to stay 10 years, you would clear break-even with 8 years, 1 month to spare.
Rate drops of three-quarters of a point or more usually clear closing costs comfortably. Consider taking the lower payment but continuing to pay your old $2,253 amount — the $283 difference applied to principal would clear the loan years early and capture the rate benefit twice.
Model extra paymentsAcross the 10 years you expect to stay, refinancing leaves you $16,012 ahead after accounting for closing costs, interest paid and the difference in remaining balance. Lifetime-interest comparisons assume you keep the loan for 30 years, which most borrowers do not.
Closing costs vary far more between lenders than rates do, and both are negotiable. Compare Loan Estimates side by side — the standardized form makes the origination, title and discount point charges directly comparable. Applications within a 45-day window count as one credit inquiry.
Worked scenarios with the full analysis, so you can see how the numbers move before entering your own.
A recent buyer capturing a one-point rate drop, with enough time remaining to clear closing costs comfortably.
Monthly saving
$283
Dropping from 7.25% to 6.25% cuts the payment from $2,253 to $1,970. Your $6,500 in closing costs is recovered after 1 year, 11 months. Since you expect to stay 10 years, you would clear break-even with 8 years, 1 month to spare.
Rate drops of three-quarters of a point or more usually clear closing costs comfortably. Consider taking the lower payment but continuing to pay your old $2,253 amount — the $283 difference applied to principal would clear the loan years early and capture the rate benefit twice.
Model extra paymentsAcross the 10 years you expect to stay, refinancing leaves you $16,012 ahead after accounting for closing costs, interest paid and the difference in remaining balance. Lifetime-interest comparisons assume you keep the loan for 30 years, which most borrowers do not.
A borrower twelve years into a 30-year mortgage, where restarting the clock offsets much of the rate benefit.
Monthly saving
$441
Dropping from 6.90% to 6% cuts the payment from $1,700 to $1,259. Your $5,500 in closing costs is recovered after 1 year, 1 month. Since you expect to stay 12 years, you would clear break-even with 10 years, 11 months to spare.
You have already paid 12 years of a 30-year loan, which means you are past the most interest-heavy years. Refinancing into a fresh 30-year term returns you to the beginning of the amortization curve. Lifetime interest actually rises by $91,493 in this scenario. A 18-year term at the new rate would capture the rate reduction without extending the payoff date.
Rate drops of three-quarters of a point or more usually clear closing costs comfortably. Consider taking the lower payment but continuing to pay your old $1,700 amount — the $441 difference applied to principal would clear the loan years early and capture the rate benefit twice.
Model extra paymentsShortening the term rather than lowering the payment — a higher monthly cost that cuts lifetime interest sharply.
Monthly increase
$374
The new payment of $2,325 exceeds your current $1,951. That can still be intentional — shortening the term raises the payment while cutting total interest — but if the goal was lower monthly cost, this structure does not achieve it.
Break-even arrives at month Infinity, but you expect to be here only 180 months. On that timeline the refinance loses roughly $73,321. Ask your lender about a no-closing-cost refinance — the rate is higher, but with no upfront cost the break-even is immediate.
Rate drops of three-quarters of a point or more usually clear closing costs comfortably. Consider taking the lower payment but continuing to pay your old $1,951 amount — the -$374 difference applied to principal would clear the loan years early and capture the rate benefit twice.
Model extra paymentsRefinancing is a purchase: you pay closing costs upfront to buy a lower payment. The only question is whether you keep the loan long enough for the savings to exceed the price.
Divide total closing costs by monthly savings and you get the break-even month. Six thousand five hundred dollars of costs against $210 of monthly savings is 31 months. Keep the loan longer than that and you profit; sell or refinance again sooner and you lose money.
The old guidance to refinance whenever you can drop the rate by a full percentage point ignores two things that determine the outcome: your closing costs and how far into the loan you already are.
A half-point drop on a large balance with low closing costs can be excellent. A full-point drop on a small balance with high costs can lose money. And refinancing into a fresh 30-year term when you are twelve years into the original can increase lifetime interest even at a materially lower rate, because you return to the interest-heavy start of the amortization curve.
The cleanest way to capture a rate reduction without extending your loan is to refinance into a term matching what you have left — if you are 6 years into a 30-year loan, take a 24-year term, or take the 30-year and pay it on a 24-year schedule.
The second approach is often better: it gives you the lower required payment as a safety valve while you voluntarily pay the higher amount. You capture nearly all the interest savings and retain the flexibility to drop back if income changes.
Closing costs vary more between lenders than rates do. A lower rate with $4,000 in extra fees is frequently the worse deal.
Refinancing late into a loan into a fresh 30-year term can raise total interest even at a lower rate.
Closing costs need years to recover. A refinance twelve months before a relocation is a straightforward loss.
It converts unsecured debt into debt secured by your home, over 30 years. The rate is lower; the risk and total interest usually are not.
Many lenders offer a slightly higher rate with zero upfront cost. For shorter holding periods this is often the better structure.
When you will keep the loan past the break-even month — closing costs divided by monthly savings. If break-even is 31 months and you plan to stay seven years, it is clearly worthwhile. If you might move in two years, it is not, unless you can get a no-closing-cost refinance where break-even is immediate.
Typically 2–3% of the loan amount, covering origination, appraisal, title insurance, recording and prepaid escrow. On a $320,000 loan that is roughly $6,400–9,600. These are negotiable and vary considerably between lenders, which is why comparing Loan Estimates matters more than comparing advertised rates.
Slightly and temporarily. The hard inquiry costs a few points, and the new account lowers your average account age. Both recover within a year. Rate shopping across multiple lenders within a 45-day window counts as a single inquiry, so comparing lenders carries no additional penalty.
It preserves your cash but means paying interest on the closing costs for the entire term — $6,500 rolled into a 30-year loan at 6.25% costs about $14,400 in total. If you have the cash and it does not compromise your emergency fund, paying upfront is materially cheaper. A no-closing-cost refinance with a slightly higher rate is often a better middle path.
It becomes harder because most conventional refinances require at least 20% equity, or 3% for some programs. If you are underwater, FHA streamline and VA interest rate reduction refinance loans have far looser equity requirements for borrowers who already hold those loan types.
The next calculations that usually follow this one.
See principal, interest, taxes, insurance and PMI — then what the loan really costs over 30 years.
Two answers: what a lender will approve, and what your budget can genuinely sustain.
Buying wins eventually in most markets. This finds the year it starts winning in yours.
Enter your balances, get a payoff date — and see exactly what the easier order costs you.
Utilization is 30% of your FICO score and has no memory. It can improve in one billing cycle.
Guides that explain the decisions behind these numbers.
How mortgage rates are determined, what moves them, and the six factors that decide whether you get the advertised rate or half a point above it.
Updated January 15, 2026
A complete first-time home buyer guide for the US: what to save, how pre-approval works, what closing costs cover, and the mistakes that cost the most.
Updated January 15, 2026
Work out how much house you can afford using the 28/36 rule, your actual budget, and the costs lenders ignore. Includes salary-by-salary examples.
Updated January 15, 2026
New tools, guides and the occasional thing that will genuinely save you money. No spam, unsubscribe anytime.
Developer note: this form has no backend. Connect an email provider and add a privacy policy before collecting real addresses.