How it works
Each payment is worked out with the standard fixed-rate mortgage formula: payment = balance × monthly rate × (1 + rate)^payments ÷ ((1 + rate)^payments − 1). Monthly savings are the current payment minus the new payment. Break-even time is closing costs divided by monthly savings — the number of months before the savings have paid back what refinancing cost. If the new rate is not lower, savings will be zero or negative, and refinancing does not pay on payment alone.
Frequently asked questions
What if I sell before break-even?
Then refinancing may lose money: you paid the closing costs but did not keep the loan long enough for the monthly savings to cover them.
Does a lower payment always mean less total interest?
No. Restarting a 30-year term can mean more total interest even with a lower payment, because you pay for more years. Compare total interest, not just the monthly figure.