Will a lower rate pay off? See your break-even month.
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Refinancing replaces your mortgage with a new one, usually to get a lower rate. It costs money — typically 2–5% of the loan in the US, or arrangement and legal fees elsewhere — so it only pays off after the break-even point.
Break-even = costs ÷ monthly saving. Watch the term: restarting a 30-year loan lowers the payment but can increase total interest.
| Current loan balance | 300000 |
| Current interest rate | 7% |
| Years left on current loan | 27 years |
| New interest rate | 6% |
| New loan term | 27 years |
| Refinance costs | 4000 |
| Add costs to the new loan? | No |
| Currency | $ Dollar |
| Monthly saving | $191.49 |
| New payment | $1,871.96 (now $2,063.44) |
| Break-even | 21 months |
| Lifetime interest change | Save $58,042 |
| Interest left on current loan | $368,556 |
| Interest on new loan | $306,514 |
$191.49 a month; break-even 21 months.
| Current loan balance | 200000 |
| Current interest rate | 5.5% |
| Years left on current loan | 20 years |
| New interest rate | 4.5% |
| New loan term | 20 years |
| Refinance costs | 1500 |
| Add costs to the new loan? | No |
| Currency | £ Pound |
| Monthly saving | £110.48 |
| New payment | £1,265.30 (now £1,375.77) |
| Break-even | 14 months |
| Lifetime interest change | Save £25,014 |
| Interest left on current loan | £130,186 |
| Interest on new loan | £103,672 |
£110.48 a month.
When you will stay in the home longer than the break-even period and the new rate is meaningfully lower — often 0.75–1 point or more.
In the US usually 2–5% of the loan amount; in the UK often £0–£1,500 in fees plus any early repayment charge.
It can — choose a shorter term to keep the payoff date.
Possibly, but the rate offered may not save enough to make it worthwhile.