Refinancing $400,000 Into a New 30-Year Term With 18 Years Left
A better rate on $400,000, but the eighteen years you had left become thirty again. See the payment fall and the lifetime interest rise at the same time.
Current loan balance $400,000 · Current interest rate 6.5% · Years left on current loan 18 years · +3 moreYour figuresEdit figures
What you still owe today
The rate you pay now
Years still to run
The rate you are offered
Years the new loan runs
Fees to complete the refinance
Break-even point
You earn the closing costs back in 9 months, but the longer term means you pay more interest over the life of the loan.
Breaks even in 9 months, but lifetime interest rises.
- Break-even point
- 9 months
- Monthly saving
- $812
- Lifetime interest saved
- -$160,756
- Saving after closing costs
- -$167,756
Over the years each loan still has to run, refinancing costs $167,756 MORE once the $7,000 of closing costs is counted — whatever the monthly payment does.
| Scenario | Keep current loanBetter | Refinance |
|---|---|---|
| Years still to pay | 18 | 30 |
| Monthly payment | $3,146 | $2,334 |
| Interest over those years | $279,589 | $440,345 |
| Closing costs | $0 | $7,000 |
| Interest + closing costs | $279,589 | $447,345 |
Method: Standard fixed-rate amortization, compared scenario against scenario
- Both loans are fixed rate with monthly compounding, and neither rate ever changes.
- The new loan equals your current balance: no cash taken out, and closing costs paid at settlement rather than rolled in.
- Property tax, hazard insurance and mortgage insurance are excluded, and no early payoff or missed payment is modelled.
- No tax table is used. Figures are estimates for comparison, not a lender quote or tax advice.
No tax rates are used in this calculation.
This is an estimate, not financial or tax advice. Confirm figures with the linked source or a licensed professional before acting on them.
The payment falls and the total rises — both are true
This is the scenario that trips up careful people, because nothing about it looks wrong. The rate improves. The monthly payment drops, and drops by a lot. The lender's summary sheet shows both facts and stops there. What it does not show is that you had eighteen years left and have just agreed to thirty, and that those twelve additional years are twelve additional years during which interest accrues on whatever balance remains.
Most of the payment reduction here is not coming from the rate at all. It is coming from spreading four hundred thousand dollars across a hundred and forty-four more monthly instalments. You can prove this to yourself on this page in under a minute: set the new term to eighteen years, matching what you had, and see how much of the monthly saving survives. Whatever remains is what the rate earned. The rest was borrowed from your future self, and the lifetime interest figure in the result is the invoice.
That does not settle the question, because a longer term is a legitimate financial tool. If the current payment is genuinely straining the household, converting some future interest into present cash flow can be the difference between stability and missed payments, and stability is worth real money. If you would redirect the freed-up cash into something that reliably earns more than the mortgage rate, the arithmetic can favour the longer term outright. Both of those are decisions. Neither is what happens when a borrower reads only the monthly figure.
The test to apply is simple and it is about intent. Ask what the extra monthly cash is for, and answer it specifically. If the answer is a named purpose — a retirement contribution, an emergency fund, ending a reliance on credit cards — the trade may well be sound. If the answer is that it just feels better, you have paid twelve years of additional interest for a feeling, and the result above will tell you roughly what the feeling cost.
What resetting the clock does to the equity you have built
Twelve years into a thirty-year loan you have crossed the point where the composition of each payment starts working for you. Early payments are almost entirely interest; later ones are mostly principal, and you have spent over a decade climbing that curve. A new thirty-year loan puts you back at the bottom of it. The balance does not change — you still owe four hundred thousand dollars — but the share of next month's payment that reduces that balance drops sharply, and it stays low for years.
The practical consequence is that equity accumulates more slowly from here, and equity is what you draw on when you sell, downsize or need to borrow against the property. Two households with identical balances and identical payments can be building ownership at very different speeds purely because one reset its term and the other did not. It does not show up anywhere on a monthly statement, which is precisely why it needs to be looked at deliberately.
There is a middle path worth pricing before you decide. Take the new rate at a term close to the eighteen years you had, rather than the full thirty. The payment relief is smaller, sometimes much smaller, but the rate improvement is preserved and the lifetime interest figure usually moves the right way instead of the wrong one. Run that version here as its own scenario. If the shorter term is unaffordable, you have learned something important about the size of the payment you are currently carrying, and that is worth knowing on its own terms.
What closing costs include
The closing cost figure you enter should be everything you pay to get the new loan, whether it comes out of your pocket at settlement or is added to the balance. Typical components are the lender's origination or underwriting fee, discount points if you bought the rate down, an appraisal, a credit report, title search and title insurance, settlement or attorney fees, recording fees and any state or local transfer tax that applies to a refinance. On a mid-size loan the total commonly lands somewhere between two and five percent of the amount refinanced, which is why the break-even is measured in years rather than months.
Two items deserve care. A no-closing-cost refinance is not free — the fees are paid through a higher rate instead, so enter zero costs and the higher rate you were actually quoted, and compare that against the version with costs and the lower rate. And rolling the fees into the balance does not remove them either; it borrows them at the mortgage rate for the whole term. This calculator assumes the costs are paid at settlement and the new loan equals your current balance, so that the break-even figure is attributable to one thing at a time.
Prepaid interest, escrow deposits for taxes and insurance, and any refund of your old escrow account are transfers of timing rather than costs of the refinance, and are best left out of the number you enter here.
How to read your result
The headline is the number of whole months before the accumulated saving equals the closing costs, rounded up, because a partial month has not finished paying anything back. Compare it against your own horizon first. If you expect to keep the loan comfortably longer than the break-even, the refinance is doing what it is supposed to. If the two numbers are close, the decision is much finer than the rate difference makes it look, and small differences in the fee quote will decide it.
Beneath the headline, the monthly saving tells you how quickly the clock runs, and the two interest figures tell you what the whole loan costs under each scenario. If the lifetime interest saved is negative, read that as the price of the lower payment rather than as a reason to stop, and decide whether the cash flow is worth it.
Every figure here is an estimate from the six values you entered. It assumes a fixed rate on both loans, no cash taken out, no change to property tax, hazard insurance or mortgage insurance, and no early payoff. A lender's own quote will differ where any of those assumptions differ, and it is the written offer that governs. Change any input and the page recalculates immediately with no reload, and the link at the top of the result carries your scenario so you can send it to someone else and have them open the same numbers.
Frequently asked questions
My payment goes down. Why does the calculator warn me?
Because two different things are true at once and only one of them appears on a lender's summary. The payment falls, largely because the balance is being spread over twelve more years than you had left. Over the full life of the new loan, those extra years of interest accrual can exceed everything the lower rate saves, so the total cost of the house goes up while the monthly cost goes down. The result above shows both figures so the trade is visible rather than implied.
How do I tell how much of the saving came from the rate?
Change one input. Set the new term to eighteen years so it matches what you had left, leave the new rate where it is, and read the payment. Whatever reduction survives that change is what the rate earned; everything that disappears was coming from the longer term. It takes a few seconds and it separates a genuine improvement in borrowing cost from a rescheduling of the same debt.
How is the refinance break-even point calculated?
Divide the total closing costs by the monthly saving, where the saving is your current principal and interest payment minus the payment on the proposed loan. The result is the number of months of lower payments needed before the accumulated saving equals what the refinance cost. This page rounds up to a whole month, because a partial month has not finished paying anything back, and it ignores what you could have earned on the fees had you invested them instead.
What if my monthly payment does not go down at all?
Then there is no break-even point, and this calculator says so in words instead of printing a zero or a negative month count. It usually happens when the new term is shorter than the years you have left, so the balance is compressed into fewer payments, or when the rate improvement is too small to offset that compression. A shorter term is not necessarily a bad deal, but it is not a cash-flow saving, so break-even is the wrong test for it.
Why can a lower payment still cost me more in the end?
Because resetting the term adds years of interest. Interest accrues on the outstanding balance every month it stays outstanding, so replacing twenty-two remaining years with a fresh thirty-year loan adds eight more years of it. That addition often exceeds everything the lower rate saved. The result on this page shows the interest under each scenario separately and the difference as a signed figure, so a negative saving is visible rather than hidden behind a smaller monthly number.
Should I include the closing costs if they are rolled into the loan?
Yes, enter them as closing costs. Rolling the fees into the balance does not make them disappear; it borrows them at the mortgage rate for the whole term, which costs more than paying them at settlement, not less. This calculator assumes the new loan equals your current balance and the costs are paid up front, so that the break-even figure can be attributed to one variable at a time. Treat a rolled-in quote as slightly optimistic here.
Is a no-closing-cost refinance a better deal?
It is the same deal priced differently. The lender covers the fees and recovers them through a higher interest rate over the life of the loan, so your break-even is immediate but your monthly saving is smaller and your lifetime interest is higher. Run the calculation both ways: once with zero costs at the higher quoted rate, once with the real costs at the lower rate, and compare the lifetime interest figures over the years you actually expect to stay.
How long do I need to stay for a refinance to be worth it?
Longer than the break-even point, with room to spare. If the calculation says thirty-one months and you might move in three years, the margin is too thin to be worth the disruption, since a sale or another refinance stops the clock and any unrealised months of saving simply never happen. As a rule of thumb, look for a break-even comfortably shorter than half the time you confidently expect to keep both the house and the loan.