How to use the Refinance Savings
- Enter the current balance, rate and remaining term.
- Enter the new rate, new term and total closing costs.
- Read the monthly saving and the break-even month.
- Compare against how long you realistically expect to keep the property.
How the calculation works
Both payments come from the standard amortisation formula. The monthly saving is the difference, and break-even is closing costs divided by that saving. A 190 monthly saving against 4,200 of costs breaks even at month 23 — refinance and sell at month 18 and you are down.
Monthly saving alone flatters a refinance that resets the term. Dropping from 22 years remaining to a fresh 30-year loan cuts the payment sharply while adding eight years of interest, so total interest paid can rise even at a lower rate. Compare lifetime interest as well as monthly cash flow, and consider a shorter new term if the payment allows it.
Break-even months = closing costs / (old payment − new payment)Source: Standard amortisation formula with break-even analysis on refinancing costs.
Worked example
Balance 268,000 at 6.75% with 24 years left, refinancing to 5.35% over 24 years with 4,900 of costs.
- Current payment ≈ 1,832.
- New payment ≈ 1,634.
- Monthly saving = 198.
- Break-even = 4,900 / 198 = 24.7 months.
Just over two years to break even, then roughly 198 a month of pure saving thereafter.
Frequently asked questions
What rate drop makes refinancing worthwhile?+
There is no fixed threshold. Compare break-even months to your expected stay — that answers it regardless of the size of the drop.
Can I roll costs into the loan?+
Usually yes, but you then pay interest on them for the full term, which pushes the true break-even later.
Does refinancing restart the term?+
By default yes. Ask for a term matching your remaining years to avoid adding interest years.
Will it hurt my credit score?+
A hard search and a new account cause a small temporary dip; rate shopping within a short window usually counts as one search.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.