The two numbers that decide a refinance
Every refinance decision reduces to a pair of questions this calculator answers directly:
- How many months until the savings repay the costs? Below your expected time in the home → proceed to question two. Beyond it → stop; the refinance is a loss regardless of how good the new rate sounds.
- What happens over the whole life? Monthly savings × remaining months, against closing costs and any term extension. This is the number that catches the payment-lowering, interest-raising refi.
Worked example
$250,000 remaining at 7.5% with 25 years left: payment $1,847. Refinance to 6% for a new 30-year term with $5,000 costs: new payment $1,499, $348/month saved, break-even in 15 months. But the lifetime line shows the catch: the fresh 30-year term pays $289,595 of interest versus $304,214 remaining on the old loan, a genuine saving here, though far smaller than $348 × 360 would suggest. Change the inputs slightly and that lifetime line flips negative while the monthly line stays green; that is exactly the trap this page exists to expose.
Term reset: the quiet cost
Refinancing 5 years into a 30-year loan onto a new 30-year loan means paying 35 years in total. The cleanest fix is to refinance into a term matching what you had left, many lenders offer custom terms (25, 22, even 18 years) on request. Failing that, take the 30-year and voluntarily pay the old, higher payment: the extra goes to principal and the reset largely cancels. The early payoff calculator shows what that discipline is worth.
When not to bother
- You are likely to move soon. Break-even months only count if you are still there to collect them.
- You are deep into the loan. Late-term payments are mostly principal; a rate cut has little interest left to save, while the term reset restarts the interest-heavy years.
- The improvement is marginal. A 0.25% cut rarely survives its own closing costs. Consider points at purchase time, or a recast if the rate is fine and the payment is the issue.