Decision
Should I refinance my mortgage?
The usual test — closing costs divided by monthly saving — measures how fast you recover the fees and says nothing about what you signed up for afterwards. A refinance can pass it comfortably and still cost tens of thousands more in total interest. Two questions settle it properly.
How to think about it
Take a $300,000 balance at 7.25% with 25 years left, refinanced at 6.25% with $6,000 of costs. Into a fresh 30-year term it saves $321 a month and breaks even in 19 months — and costs about $14,400 more in total interest than never refinancing at all, because five extra years of payments outweigh the lower rate.
Into a term matching the 25 years remaining, the same refinance saves only $189 a month, breaks even in 32 months, and saves about $56,800 over the life of the loan. The option that looks worse on both headline numbers is the better one.
So ask two questions in order. Does the new loan reduce total remaining interest? And will you hold it past the break-even month? A refinance that fails the first is a loss regardless of how quickly it recovers its fees.
Work through these, in this order
- Does this refinance actually save money?Reports the break-even month alongside the lifetime cost difference, so the trap above is visible rather than implied. Run it twice: once at a matched term, once at a fresh 30 years.Open the Mortgage Refinance Calculator
- What is the new payment?Establishes the monthly effect on its own, separate from the lifetime question. Lowering the payment is a legitimate goal — it should just be chosen knowingly rather than as a side effect.Open the Mortgage Calculator
- Where in the schedule am I restarting?Refinancing into a fresh term puts you back at the interest-heavy end of the curve. Seeing the split shift is the clearest way to understand why a lower rate can still cost more.Open the Amortization Calculator
- If I am taking cash out, what does it really cost?Cash-out converts unsecured debt into debt secured by your home. The rate falls and the consequence of failure rises from a damaged credit report to losing the property — worth pricing deliberately.Open the Cash-Out Refinance Calculator
What the numbers together tell you
Refinance when the new loan reduces total remaining interest and you will hold it well past the break-even month. Keep the term no longer than what remains unless a lower payment is the explicit goal — and if it is, recognise it as restructuring rather than saving.
Shop it properly: quotes for the same borrower vary meaningfully, and credit scoring treats multiple mortgage inquiries inside roughly 14 to 45 days as one event, so comparing several lenders costs nothing.
Read more about this
Should You Refinance Your Mortgage?
Refinancing can save hundreds a month — or quietly cost you more by resetting the clock. The deciding number is your break-even point. Here's when refinancing makes sense and when it doesn't.
15-Year vs. 30-Year Mortgage: How to Choose
A 15-year mortgage costs far less interest and builds equity fast; a 30-year keeps the monthly payment low and flexible. Here's how to weigh the trade against your budget and goals — and why the middle path often wins.
Frequently asked questions
How much does the rate need to drop to be worth it?
The old rule of thumb is 0.5–1%, but the threshold is the wrong test. What matters is whether total remaining interest falls and whether you hold the loan past break-even — a 1% drop into a fresh 30-year term can still cost more than staying put.
Is a no-cost refinance really free?
No. The costs are either added to the balance or priced into a higher rate. That can be the right choice if you might move soon, since there is nothing to recover, but over a loan held to term it is the most expensive version.
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Disclaimer: DayCents provides this calculator for educational purposes only. Results are estimates based on your inputs and the stated assumptions — they are not financial advice, a quote, or an offer of credit. Consult a qualified financial professional before making major money decisions.