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Refinance vs. Extra Payments Calculator — Which Saves More?

Quick Answer: Compare a refinance scenario to making extra payments on your current loan. This calculator shows total interest, payoff date, and break-even point so you can pick the option that saves more total dollars.

How do you choose between refinancing and extra payments?

The honest answer is "do the math" — and then check that the math survives reality. A refinance saves money only if the rate drop is large enough that the monthly savings outpaces the closing costs within a few years, AND you actually stay in the home long enough to capture those savings.

What rate drop justifies a refinance?

The classic rule of thumb is at least 0.75-1.0% below your current rate. Below that, closing costs typically eat the savings. The longer your remaining term, the smaller the rate drop needed to make a refi worthwhile.

When are extra payments the smarter move?

Extra payments win when current rates are not meaningfully lower than yours, when you plan to move within 3-5 years, or when you cannot easily come up with $5K-$10K for closing costs. They are zero-cost, fully reversible, and preserve your existing rate.

What if you are refinancing mainly to escape PMI?

Check first whether you can simply cancel it. On a conventional loan, borrower-paid PMI can be removed on request at 80% loan-to-value for little or no cost, which beats a refinance that resets your term and charges closing costs. Refinancing is the right exit only for FHA loans carrying lifetime MIP, or for lender-paid PMI baked into the rate — our guide to removing PMI without refinancing covers which situation you are in.

Frequently Asked Questions

Should I refinance or make extra mortgage payments?

If current rates are at least 0.75% lower than your existing rate and you plan to stay in the home for at least 5 years, refinancing usually wins. If rates are similar to your current rate, extra payments are simpler and avoid closing costs.

What is the break-even point on a mortgage refinance?

The break-even point is how long it takes for the monthly savings from a lower rate to recoup the closing costs of the refinance. Typical break-even is 24-48 months. If you plan to move before then, a refi rarely makes sense.

How much do refinance closing costs typically run?

Refinance closing costs typically range from 2% to 5% of the loan amount — that is $4,000 to $10,000 on a $200,000 loan. Some lenders offer "no-cost" refis, but the costs are usually rolled into a higher rate.

Can I do both refinance and extra payments?

Absolutely — and many homeowners do. Refinance to a lower rate (or shorter term) first, then make extra principal payments on the new loan. This often produces the maximum total savings.

When is refinancing not worth it?

Refinancing is rarely worth it if you plan to move within 3-5 years, if rates have only dropped 0.25-0.5%, or if you would extend the term back to 30 years (resetting the amortization clock).

Will refinancing hurt my credit score?

A refinance triggers a hard credit inquiry that may temporarily lower your score by a few points, and opening a new account temporarily reduces your average account age. The impact is small and usually recovers within 6-12 months.