How do I know if refinancing is worth it?

Refinancing is typically worth it if you can lower your rate by 0.75-1% or more, plan to stay in your home past the break-even point (usually 2-3 years), and the total savings exceed closing costs.

What is the break-even point on a refinance?

The break-even point is when your monthly savings have paid for your closing costs. Calculate it by dividing closing costs by monthly savings. For example, $6,000 in costs with $200/month savings = 30 months to break even.

Refinance Calculator: Is Refinancing Worth It?

For a comprehensive guide to when refinancing makes sense, break-even analysis, and the refinance process, see the Mortgage Refinancing hub.

Determine if refinancing your mortgage will save you money.

Quick Refinance Analysis

Step 1: Calculate Monthly Savings

Your Current Loan	Your New Loan
Remaining balance: $_____	Same balance
Current rate: ____%	New rate: ____%
Current payment: $_____	New payment: $_____
Monthly savings	$_____

Step 2: Calculate Break-Even

Break-Even = Closing Costs ÷ Monthly Savings

Closing Costs	Monthly Savings	Break-Even
$3,000	$150	20 months
$4,000	$150	27 months
$5,000	$200	25 months
$6,000	$200	30 months
$8,000	$300	27 months
$10,000	$400	25 months

Refinance Savings Examples

These examples use hypothetical rates; the Freddie Mac 30-year average was 7.40% for the week of October 8, 2026, so the lower refinance rates shown would need rates to fall.

Example 1: Rate Drop of 1%

Current: $300,000 at 7.50%, 27 years remaining

Scenario	Current	Refinance @ 6.50%
Rate	7.50%	6.50%
Monthly payment	$2,098	$1,896
Monthly savings	—	$202
Closing costs	—	$6,000
Break-even	—	30 months

If staying 30+ months: Refinance makes sense

Example 2: Rate Drop of 0.3%

Current: $350,000 at 7.25%, 25 years remaining

Scenario	Current	Refinance @ 6.95%
Rate	7.25%	6.95%
Monthly payment	$2,387	$2,317
Monthly savings	—	$70
Closing costs	—	$6,500
Break-even	—	92 months

If staying 92+ months: Worth considering only for a long stay

Example 3: Shortening Term

Current: $250,000 at 7.00%, 30-year, 25 years remaining

Scenario	Current 30-yr	New 15-yr @ 6.25%
Rate	7.00%	6.25%
Monthly payment	$1,767	$2,144
Total interest remaining	$280,080	$135,840
Interest savings	—	$144,240
Payoff	25 years	15 years

Higher payment but massive long-term savings

Payment Comparison Tables

$200,000 Balance

Rate	30-Year	20-Year	15-Year
6.00%	$1,199	$1,433	$1,688
6.50%	$1,264	$1,491	$1,742
7.00%	$1,331	$1,551	$1,798
7.50%	$1,398	$1,611	$1,854
8.00%	$1,468	$1,673	$1,911

$300,000 Balance

Rate	30-Year	20-Year	15-Year
6.00%	$1,799	$2,149	$2,532
6.50%	$1,896	$2,237	$2,613
7.00%	$1,996	$2,326	$2,696
7.50%	$2,098	$2,417	$2,781
8.00%	$2,201	$2,509	$2,867

$400,000 Balance

Rate	30-Year	20-Year	15-Year
6.00%	$2,398	$2,866	$3,375
6.50%	$2,528	$2,982	$3,484
7.00%	$2,661	$3,101	$3,595
7.50%	$2,797	$3,222	$3,708
8.00%	$2,935	$3,346	$3,823

Total Interest Comparison

$300,000 Loan: 30-Year vs 15-Year

Rate	30-Year Interest	15-Year Interest	Savings
6.00%	$347,515	$155,683	$191,832
6.50%	$382,633	$170,398	$212,235
7.00%	$418,527	$185,367	$233,159
7.50%	$455,152	$200,587	$254,565

Break-Even Calculator

Quick Break-Even Chart

Monthly savings needed to break even in:

Closing Costs	12 mo	24 mo	36 mo	48 mo
$3,000	$250	$125	$83	$63
$4,500	$375	$188	$125	$94
$6,000	$500	$250	$167	$125
$8,000	$667	$333	$222	$167
$10,000	$833	$417	$278	$208

When Refinancing Makes Sense

Good Reasons to Refinance

Situation	Benefit
Rate dropped 0.75%+	Lower payments & interest
Shorter term available	Pay off faster
Remove PMI	Eliminate insurance premium
ARM to fixed	Rate stability
Cash-out for home improvement	May be tax-deductible

Think Twice About Refinancing

Situation	Why
Rate drop < 0.5%	May not offset costs
Moving in 1-2 years	Won’t break even
Resetting to 30 years	Extends payoff date
High closing costs	Longer break-even

Costs to Factor In

Cost	Typical Range
Origination fee	0.5-1% of loan
Appraisal	$400-$700
Title insurance	$500-$1,500
Other closing costs	$1,000-$3,000
Total typical	2-5% of loan

No-Closing-Cost Option

Feature	Standard Refinance	No Closing Cost
Closing costs	$6,000 paid upfront	$0 upfront
Interest rate	6.50%	6.875%
Monthly payment	$1,896	$1,970
Better if staying	About 7+ years	Under about 7 years

Refinance Decision Flowchart

Rate difference 0.75%+?
- Yes → Continue
- No → Probably not worth it
Planning to stay past break-even?
- Yes → Continue
- No → Consider no-cost refinance or skip
Can afford closing costs?
- Yes → Standard refinance
- No → Roll into loan or no-cost option
Resetting term significantly?
- No → Good to proceed
- Yes, but much lower rate → May still save
- Yes, similar rate → Reconsider

Total Cost Comparison

$300,000 current balance, choice to refinance or not:

Keep Current (7.50%, 25 years left)

Item	Amount
Monthly payment	$2,217
Total remaining payments	$665,092
Total interest remaining	$365,092

Refinance (6.50%, new 30-year)

Item	Amount
Monthly payment	$1,896
Total remaining payments	$682,633
Total interest	$382,633
Closing costs	$6,000
Total cost	$688,633

Lower payment but higher total cost (resetting to 30 years)

Refinance (6.50%, 20-year term)

Item	Amount
Monthly payment	$2,237
Total remaining payments	$536,813
Total interest	$236,813
Closing costs	$6,000
Total cost	$542,813

Lower total cost, similar payment, done sooner

Written by WealthVieu

WealthVieu researches and writes data-driven personal finance guides using primary sources including the IRS, Bureau of Labor Statistics, Federal Reserve, and Census Bureau.

The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy