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Calculate mortgage refinance savings with break-even analysis, comparing current vs new loans. Includes cash-out scenarios, 8-year timeline projections, 7 rate scenarios, and lifetime interest savings to determine if refinancing makes financial sense.

Frequently Asked Questions

When should I refinance my mortgage?

Refinance when you can lower your rate by at least 0.75-1.00% (2024-2025 guideline), plan to stay in the home beyond break-even point (typically 2-4 years), or need cash-out for high-return investments/debt consolidation.

With 2025 rates (6.5-7.5%), refinancing from 2021-2022 rates (3-4%) rarely makes sense unless switching from ARM to fixed or accessing home equity for 8%+ credit card debt payoff.

How do I calculate my refinance break-even point?

Break-even point = Total closing costs ÷ Monthly payment savings.

Example: $4,000 closing costs, $150/month savings = 27 months (2.25 years) break-even.

Rule of thumb: If break-even is <36 months and you plan to stay 5+ years, refinancing is financially sound.

Break-even ignores opportunity cost of closing costs—if you could invest $4k at 8% return, true break-even extends by 6-12 months.

What closing costs should I expect when refinancing?

2025 typical closing costs: 2-6% of loan amount. $300k refinance = $6k-$18k total.

Breakdown: Origination fee (0.5-1.5% of loan, $1,500-$4,500), Appraisal ($500-$800), Title insurance ($1,000-$2,000), Escrow/Attorney fees ($500-$1,500), Recording fees ($200-$500).

No-closing-cost refinance option: Lender pays upfront costs but charges 0.25-0.50% higher rate—only worthwhile if break-even <2 years.

Should I do a cash-out refinance or HELOC?

Cash-out refinance: Better if you need $50k+, current rate is similar to refi rate, and want fixed-rate stability. 2025 rates: 7.0-7.75%.

HELOC: Better for smaller amounts ($10k-$50k), short-term needs (<5 years), or when your first mortgage has a great rate (3-4%) you don't want to lose. 2025 HELOC rates: 9.0-11.0% variable.

Key decision: Don't cash-out-refi a 3.5% mortgage into 7.5% to save 1% on HELOC rate—keep low first mortgage, use HELOC for flexibility.

How does refinancing affect my total interest paid?

Refinancing resets the amortization clock, potentially increasing total interest despite lower rate.

Example: $300k mortgage, 25 years remaining at 6.5% ($577k total interest).

Refinance to 5.25% for 30 years = $565k new total interest, but you pay interest for 30 years vs 25 years.

Net result: May save $12k interest but pay 5 extra years.

Best strategy: Refinance to lower rate but keep same payoff timeline (refi 25-year remaining into 25-year term, not 30-year)—maximize savings without extending debt.

What are the biggest refinancing mistakes to avoid?

Top 5 costly mistakes: (1) Extending loan term—refinancing 20 years remaining into 30 years adds $100k+ interest despite rate drop. (2) Ignoring closing costs—$6k costs with $100/month savings = 60 months break-even (5 years). (3) Cash-out for depreciating assets—pulling equity for cars/vacations creates phantom debt. (4) Refinancing too often—every 2-3 years adds $6k-$12k closing costs, erasing rate savings. (5) Forgetting PMI—refinancing to <20% equity triggers PMI ($100-$300/month), negating payment savings.

Verify equity >20% before refinancing.

About This Page

Editorial & Updates

  • Author: SuperCalc Editorial Team
  • Reviewed: SuperCalc Editors (clarity & accuracy)
  • Last updated: 2026-01-13

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Financial/Tax Disclaimer

This tool does not provide financial, investment, or tax advice. Calculations are estimates and may not reflect your specific situation. Consider consulting a licensed professional before making decisions.