When does a lower rate pay back the cost of refinancing? The mortgage refinance calculator answers with three numbers: the new payment, the month the savings cover the closing costs, and what the new loan saves or costs over its life.
Its example is a $300,000 balance with 27 years left at 8.4%. It is refinanced into a new 30-year loan at 7.4%, Freddie Mac's average for the week of October 15, 2026. The payment drops from $2,345 to $2,077, a saving of $268 a month. Closing costs of $9,000, or 3% of the balance, take 34 months to earn back.
The break-even math
The calculator uses the same rule as the Federal Reserve's refinancing worksheet: closing costs divided by monthly savings. Here that is $9,000 ÷ $267.50, or 33.6 months, so the refinance pays for itself in month 34. If you might sell or refinance again before then, it loses money.
The monthly saving is only half the story. A new 30-year loan lowers the payment partly by stretching it out, and here it adds 3 years of payments. The interest left on the old loan is $459,663, and the new loan charges $447,770. After the $9,000 of costs, the lifetime saving is just $2,893. The same refinance over the 27 years left, if a lender offers that term, would save $56,559.
How big a rate drop it takes
On the same balance, with the same $9,000 of costs paid at closing, here is what each drop does:
| Rate drop | Saved a month | Break-even | Over the loan |
|---|---|---|---|
| 0.25 points | $115 | Month 79 | $46,497 lost |
| 0.5 points | $165 | Month 55 | $30,179 lost |
| 0.75 points | $216 | Month 42 | $13,714 lost |
| 1 point | $268 | Month 34 | $2,893 saved |
| 1.5 points | $371 | Month 25 | $36,519 saved |
| 2 points | $477 | Month 19 | $70,667 saved |
Today's 7.4% average is only 0.39 points below the 7.79% the 30-year rate reached in October 2023. So on the page's numbers, refinancing for a lower rate now pays mostly on loans well above the average.
The familiar 1% rule says to refinance once rates fall a full point below yours. The page calls it a rough guide, not a rule, because it ignores closing costs, loan size and how long you'll keep the loan. Economists Sumit Agarwal, John Driscoll and David Laibson worked out when refinancing is best in a 2013 paper in the Journal of Money, Credit and Banking. With costs of $2,000 plus 1% of the loan, the best drop came to 1.07 points on a $1 million loan, 1.39 points on $250,000 and 1.93 points on $100,000. Small loans need bigger drops, because part of the cost is a fixed fee. Their example also assumed a 28% tax bracket and the rates of its time.
Costs, and whether to roll them in
Freddie Mac says to expect closing costs of 3% to 6% of the loan principal, or $9,000 to $18,000 on $300,000. The median refinance in 2023 had $7,329 in total loan costs, up from $4,979 in 2022, according to a Consumer Financial Protection Bureau report published in December 2024.
Rolling the $9,000 into the loan saves cash at closing but costs more over time. The payment rises to $2,139, and break-even moves from month 34 to month 43. The $2,893 lifetime saving turns into a $10,540 cost, because you pay 7.4% interest on the costs for 30 years.
A 15-year refinance at Freddie Mac's 6.71% average works differently. It costs $2,648 a month, $303 more than the current payment, so there is no monthly saving to break even on. But it cuts the interest left from $459,663 to $176,654 and ends the loan 12 years sooner. After closing costs, it saves $274,009.
What the calculator leaves out
It models fixed-rate loans paid on schedule, principal and interest only. Property tax and insurance don't change with a refinance, so they are left out. So are mortgage insurance, prepayment penalties, cash-out refinancing and what money could earn elsewhere. Freddie Mac doesn't survey 20-year loans, so that term needs a lender's quote. The page suggests comparing Loan Estimates from several lenders; mortgage credit checks within 45 days count as a single inquiry, according to the CFPB.
Use it on your own site
The refinance calculator is free to embed on a blog or website with copy-and-paste code, with no ads or tracking. Here is how to embed it.
Source: Freddie Mac via FRED, week of October 15, 2026; Freddie Mac on refinancing costs, checked October 18, 2026; CFPB mortgage market report, December 2024; Federal Reserve refinancing worksheet; Agarwal, Driscoll and Laibson, 2013. Figures are educational estimates, not financial advice.