The break-even point
If a refinance costs $6,000 and saves $197 a month, it takes about 31 months to come out ahead. If you expect to sell or refinance again before then, the new loan may cost more than it saves.
Watch the term
Starting a new 30-year loan when you have 28 years left on the old one lowers the payment partly by stretching the debt out. The calculator shows total remaining payments for both loans, so you can see whether you actually save money over time, not just each month.
Costs to expect
Closing costs often run a few percent of the loan amount and can include lender fees, appraisal, title insurance, and recording fees. Lenders must give you a Loan Estimate within three business days of applying, which lists these costs.
Frequently asked questions
How much lower should my rate be to refinance?
There's no fixed rule. What matters is whether the monthly savings cover the closing costs before you plan to move, which is what the break-even figure shows.
Is it better to roll closing costs into the loan?
Adding them to the loan means no cash upfront, but you pay interest on them for the life of the loan and your payment is slightly higher.
What is a cash-out refinance?
It's a new, larger loan that pays off the old one and gives you the difference in cash. Enter the new total as the balance to see the payment, but remember you'll owe more on your home.