What is the Break-Even Point?

The break-even point is the moment when your accumulated monthly savings equal the upfront cost of refinancing. For example, if closing costs are $3,000 and you save $100/month, it takes 30 months (2.5 years) to break even. If you move before then, you lose money.

Should I refinance to a shorter term?

Switching from a 30-year to a 15-year mortgage usually increases your monthly payment but saves significantly on total interest. If you can afford the higher payment, it is a great way to build equity faster.

Are closing costs tax deductible?

Generally, no. Closing costs for a refinance on your primary home are not deductible in the year you pay them. However, 'points' (prepaid interest) might be deductible over the life of the loan.

Mortgage Refinance Calculator | Break-Even Analysis | Finmato

The Refinance Trap: Low Rates vs. High Fees

A lower interest rate sounds amazing. Going from 7% to 6% is a no-brainer, right? Not necessarily. Refinancing isn't free. Banks charge thousands of dollars in closing costs—appraisals, title searches, origination fees. If you pay $5,000 to save $50 a month, it will take you over 8 years just to break even! Our Mortgage Refinance Calculator does the "Break-Even Math" so you don't get tricked by a flashy low rate.

Why Refinance?

Homeowners typically refinance for one of three reasons:

Lower Payment

Extending the term or lowering the rate to improve monthly cash flow.

Shorten Term

Switching from a 30-year to a 15-year loan to become debt-free faster.

Cash Out

Taking equity out of the home to pay for renovations or high-interest debt.

The "Reset" Danger

One hidden cost of refinancing is "resetting the clock." If you have been paying your 30-year mortgage for 5 years, you only have 25 years left.

If you refinance into a *new* 30-year loan, you are now paying for 35 years total. Even with a lower interest rate, the *extra 5 years* of payments might mean you pay MORE total interest over your life.

Pro Tip: If you refinance, try to keep the term equal to your remaining years (e.g., refinance to a 25-year or 20-year loan) to avoid this trap.

Removing PMI

Has your home value skyrocketed? Refinancing might let you drop Private Mortgage Insurance (PMI) if your new LTV is under 80%.

Rate-and-Term

The classic refi. You just change the rate and term without taking cash out. This is the safest way to save money.

Getting a divorce

Refinancing is often required to remove an ex-spouse from the mortgage title and buy out their share of the equity.

Frequently Asked Questions

Can I roll closing costs into the loan?

Yes. This is called a "No-Closing-Cost Refinance." However, it's not truly free. The lender increases your loan balance or charges a higher interest rate to cover the fees. You pay interest on those fees for 30 years.

How much equity do I need?

Most lenders require you to keep at least 20% equity (80% LTV) to get the best rates. If you have less than 20% equity, you can still refinance, but you may have to pay PMI.

Does refinancing hurt my credit?

Temporarily, yes. The lender does a "hard pull" which drops your score by a few points. However, if refinancing lowers your monthly debt burden, your score will recover quickly.

Lending Estimate Only

This calculator provides estimates. Final interest rates and closing costs are determined by your credit score, debt-to-income ratio, and lender.

Data Privacy

We do not store your financial data. This calculator runs entirely in your browser.

Mortgage Refinance Calculator

Monthly Savings