Tool 01
Refinance break-even calculator
One division sum decides almost every refinance. Costs divided by monthly saving gives the month you turn positive. Everything else is commentary.
Tool 01
Move the inputs, watch the month move
Closing costs divided by the monthly saving gives the month you turn positive. Everything else is commentary. Move the inputs and watch the month move.
You break even in22 months
| Option | Payment | Total interest |
|---|---|---|
| Keep the current loan | — | — |
| New loan, fresh 30 years | — | — |
| New loan, same finishing date | — | — |
- Monthly saving, fresh 30
- —
- Lifetime interest change, fresh 30
- —
- Monthly change, same finishing date
- —
- Lifetime interest change, same date
- —
Sample output. Not an offer or a commitment to lend. Your loan estimate carries the real figures.
Costs divided by monthly saving is the whole model
Everything else is commentary. On the defaults above, $4,400 of closing costs against a $304 monthly saving breaks even in month 15. Before month 15 the refinance has cost you money.
Compare the same finishing date
A fresh 30-year term on a loan with 26 years left lowers the payment partly by stretching the debt. The term-preserving column shows what the same rate does when the loan still finishes in 26 years.
Lifetime interest is the second number
A lower payment with a longer term can still cost more in total interest. Both figures matter, and which one you weight depends on how long you will keep the house.
Lender credits move the break-even, not the rate
Taking a slightly higher rate in exchange for a credit toward costs shortens the break-even dramatically. On a file you expect to refinance again within three years, that is usually the better trade.
Read it properly
Why the second row usually matters more than the first
Refinancing a loan with twenty-six years left into a fresh thirty-year mortgage lowers the payment two ways at once. Part of the drop comes from the lower rate, which is the part you wanted. The rest comes from stretching the remaining debt across another four years, which is the part nobody mentions.
The term-preserving row shows what the new rate alone does. It carries a higher monthly payment than the fresh thirty, and almost always a lower lifetime interest figure. On a file where the borrower intends to stay put for the duration, that row is the honest comparison.
On a file where the borrower expects to move inside five years, the opposite is true. Lifetime interest is irrelevant because the loan will not live that long; the break-even month and the monthly cash flow are the only figures that matter. Which row you should be reading depends entirely on a fact about your life, not about the loan.
Lender credits are the third lever. Taking a rate an eighth or a quarter above par in exchange for a credit toward closing costs shortens the break-even sharply, because the numerator shrinks faster than the denominator. On a file you expect to refinance again within three years, that trade is usually the better one, and it is rarely offered unless you ask.
Lock when a rate move against you would break the purchase. Locking is a risk decision, not a prediction. Choose a term that reaches your real settlement date with a margin, because extensions run about 0.03 points per day and a blown lock re-prices at the worse of the two markets.
An option most wholesale desks offer once per loan. If the market improves by at least 0.250% after you lock, you can take the better rate for a fee of around 0.125 points. It normally has to be exercised at least seven days before closing and after the file leaves underwriting.
The annual percentage rate folds the finance charges into a single yearly figure, so a loan with points and fees shows a higher APR than its note rate. It is useful for comparing two loans of the same type and term, and misleading for anything else.
It depends entirely on how long you keep the loan. A point costs 1% of the loan amount and typically buys about 0.250% in rate. Divide the cost by the monthly saving to get the break-even month, then compare that honestly against your plans.
In the Richmond market, roughly $3,200 to $5,400 on a refinance and more on a purchase once title insurance and Virginia recordation tax are included. Those are sample ranges; your loan estimate gives the real figures on page two.
Yes, within limits set by programme and by loan-to-value. FHA allows up to 6% of the price. Conventional runs from 3% to 9% depending on occupancy and down payment. VA has its own concession rules.
Send me your current loan and I will run it
Balance, rate, remaining term and the closing costs you were quoted. I will tell you honestly whether the refinance pays, including when the answer is no.
Three wholesale quotes on the same day's pricing, before you choose.