Refinance savings show up in two places — most people only look at one
Everyone checks the payment: "I'll save $263 a month." That's real, but it's half the story. At a lower rate, more of every payment becomes principal — equity you keep — from the very first month. Our calculator shows both: the payment savings everyone quotes, and the year-by-year interest saved plus extra principal built that most people never see. Sometimes a refinance with modest payment savings is still a big win on total cost; occasionally the reverse is true.
Two break-evens, and why the difference matters
The classic break-even — closing costs divided by monthly payment savings — tells you when your cash flow recovers. Our second number, the true-cost break-even, asks when you're actually wealthier: it accounts for interest paid, principal built, and what financing the closing costs does to your balance. If you might sell or refinance again before the true-cost break-even, the deal deserves a harder look. As a rule of thumb, a refi that breaks even inside 24 months is strong; past 48, be skeptical.
Watch the term reset
Five years into a 30-year loan, refinancing into a fresh 30-year restarts your amortization clock — you go back to the interest-heavy front of the schedule. That can still make sense at a much lower rate, but compare honestly: run the new loan at a 25-year term (matching your remaining time), or keep the 30 and use extra payments to hold your original payoff date. "No-cost" refinances deserve the same scrutiny — the cost is real, it's just hiding in the rate or the balance.
How much does a refinance cost?
Typically 2%–4% of the loan amount all-in (origination, appraisal, title, recording). Enter the quoted figure in closing costs above; try it both ways — paid at closing versus rolled into the loan — and compare the break-evens.
When is refinancing worth it?
The old "1% rule" is a shortcut, not a law. What matters is your break-even versus how long you'll keep the loan — plus what the rate drop does to your principal building. Run your real numbers above.