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How much does a lower rate save?
A $300,000 balance at 7.5% with 28 years left, refinanced into a new 30-year loan with $6,000 in closing costs:
| Rate drop | New payment | Monthly savings | Break-even | Lifetime |
|---|---|---|---|---|
| −0.5 pt (7%) | $1,995.91 | $142.69 | 43 mo | −$5,951 |
| −0.75 pt (6.75%) | $1,945.79 | $192.81 | 32 mo | $12,083 |
| −1 pt (6.5%) | $1,896.20 | $242.40 | 25 mo | $29,936 |
| −1.5 pt (6%) | $1,798.65 | $339.95 | 18 mo | $65,057 |
| −2 pt (5.5%) | $1,703.37 | $435.23 | 14 mo | $99,362 |
Assumptions
- Both loans are fixed-rate; principal and interest only (taxes and insurance don't change).
- Current payment is what pays off today's balance over the remaining term.
- Lifetime savings compare all remaining payments and ignore investment returns on cash.
Frequently asked questions
When does refinancing make sense?+
When the monthly savings repay your closing costs before you expect to sell or refinance again (the break-even point), and the lifetime cost is lower. A common rule of thumb is a rate drop of at least 0.5–1 percentage point, but the break-even math is what matters.
What is the refinance break-even point?+
Closing costs divided by monthly savings. If a refinance costs $6,000 and saves $300 a month, you break even in 20 months; after that, the savings are yours.
Should I roll closing costs into the loan?+
Rolling costs in avoids paying cash today but adds them to your balance, so you pay interest on them. The calculator shows both ways.
Does refinancing to a new 30-year loan always save money?+
Not always. Restarting a 30-year term lowers the payment partly by stretching the loan, which can raise total interest. Compare the lifetime savings, or choose a shorter new term.
Calculator version 1.0.0. Results are estimates for educational purposes and are not a loan offer or financial advice.