Refinance Calculator

The 2% rule is a rule of thumb suggesting refinancing is worth considering only if your new rate is at least 1–2 percentage points lower than your current rate. It is a quick mental shortcut, but it ignores your actual closing costs, loan balance, and how long you plan to stay in the home — all of which matter more than a flat percentage. A small rate drop on a large balance you will hold for many years can be worth it, while a large drop on a small, soon-to-be-paid-off loan may not be. Instead of relying on the 2% rule, use this calculator's break-even point: divide your closing costs by your monthly savings to see exactly how many months it takes to come out ahead.

Refinancing a $300,000 mortgage typically costs 2–5% of the loan amount, or roughly $6,000–$15,000. Common fee categories include: loan origination/underwriting fees (0.5–1.5% of the loan), appraisal fee ($400–$700), title search and title insurance ($1,000–$2,500), recording fees ($50–$250), credit report fees, and prepaid items like escrow for taxes and insurance. Some lenders offer lender credits that reduce upfront costs in exchange for a slightly higher interest rate. The exact total varies by state, lender, and whether you shop for third-party services like title insurance.

It depends on your break-even point versus how long you plan to keep the loan. A 1-percentage-point rate drop can still produce meaningful monthly savings on a large balance with many years remaining — enough to recoup closing costs in 2–4 years in many cases. On a smaller balance or a loan you plan to pay off or sell soon, a 1% drop may not save enough to offset closing costs before you move. Enter your current balance, rates, and closing costs into this calculator to see your exact break-even point in months, then compare that to your expected time in the home.

As a worked example: on a $300,000 balance, dropping from 7% to 6% on a 30-year term reduces the monthly principal-and-interest payment by roughly $200–$210/month (about $1,996 to $1,799 at those rates). With typical closing costs of $6,000, the break-even point would be around 28–30 months — a little over two years. If you plan to stay in the home longer than the break-even period, the refinance is generally worth it. Plug in your exact balance, remaining term, and closing costs above to get numbers specific to your situation.

A no-closing-cost refinance does not mean the costs disappear — the lender instead covers them by charging you a slightly higher interest rate (a "lender credit"), or by rolling the closing costs into your new loan balance so you finance them over time. The tradeoff: a higher rate costs you more in interest over the life of the loan, while rolling costs into the balance means you pay interest on those costs too. This option can make sense if you plan to move or refinance again soon, since you avoid cash out of pocket now, but it typically costs more in total if you keep the loan long-term.