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Refinance Calculator
Lowering your rate sounds great, but does it actually save you money? It depends on how long you stay. Let's find your "Break-Even Point."
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The "Break-Even" Trap
Refinancing isn't free. You have to pay closing costs (usually $3,000 - $6,000). If you save $100/month but paid $4,000 to refinance, it takes you 40 months (3.3 years) just to break even.
If you move before then, you lost money.
💡 Real Talk from David Chen, CFA
Don't reset your clock! If you've been paying your 30-year mortgage for 7 years, and you refinance into a NEW 30-year loan, you just extended your debt sentence. Refinance into a 20-year or 15-year term to actually get ahead.
When Should You Refinance?
- The 1% Rule: Generally, if you can lower your rate by 1% or more, it's worth looking into.
- Credit Score Improved: If your score jumped from 650 to 750, you qualify for much better rates.
- Switching Loan Types: Moving from an ARM (Adjustable Rate) to a Fixed Rate for stability.
- Removing PMI: If your home value went up, refinancing might kill that annoying PMI payment.
⚠️ Common Mistake: "No Closing Cost" Refinance
There is no such thing as a free lunch. "No closing cost" just means they rolled the fees into your loan balance (you pay interest on them for 30 years) or they gave you a higher interest rate. Do the math.
Reviewed by David Chen, CFA
Chartered Financial Analyst
David helps homeowners see past the "lower monthly payment" sales pitch.
Frequently Asked Questions
When should I refinance my mortgage?
Refinance when: (1) Rates drop 0.5-1% below your current rate, (2) You'll stay in home long enough to recoup closing costs (usually 2-3 years), (3) You can afford closing costs ($3k-$6k on average). Don't refinance if selling soon.
How much does refinancing cost?
Typical closing costs: 2-5% of loan amount. On a $300k loan: $6k-$15k. Includes appraisal ($500), origination fee (1%), title insurance, credit report, recording fees. Some lenders offer 'no-cost' refi by rolling costs into loan or charging higher rate.
What is the breakeven point for refinancing?
Breakeven = Closing Costs ÷ Monthly Savings. Example: $6k costs, $200/mo savings = 30 months (2.5 years). If you'll move before breakeven, don't refinance. Factor in opportunity cost of upfront cash.
Should I refinance to a shorter term?
Refinancing from 30yr to 15yr saves massive interest but raises monthly payments. Good if: You can afford higher payment, want to own home faster, rates are low. Bad if: Stretches budget, reduces emergency fund, limits investing capacity.