What is a rate-and-term refinance?

Replacing your existing mortgage with a new one at a different rate, a different term, or both — while taking no cash out beyond a token amount. It is the cheaper and simpler of the two refinance types: lenders price it better than a cash-out because the leverage does not increase, the credit requirements are looser, and the loan-to-value limits are far more generous. If you want money from your equity, that is a different product with different pricing.

Why does my balance go up when I refinance to a lower rate?

Two things push it up. Closing costs rolled into the loan add to the balance immediately. More importantly, a fresh schedule restarts the amortisation curve — early payments are mostly interest, so principal falls slowly at first. If you were years into the old loan, you had already climbed past that stage, and a reset drops you back to the bottom of it. On the worked example the balance is $10,415 higher after a year despite a rate more than a point lower.

What is the difference between the cash and equity break-even?

The cash break-even asks when the monthly saving has repaid the closing costs. The equity break-even asks when your balance is finally lower than it would have been. They measure different things and can differ by years — on the example, fifteen months against never. Most calculators publish only the first because it is flattering and easy, but a borrower who sells before the equity figure arrives walks away with less than if they had done nothing.

Should I keep the same term or start a new thirty years?

Matching what you have left is almost always better and rarely offered by default. On the worked example, twenty-two years at the new rate still saves $206 a month, reaches the equity break-even at seventy months, and finishes $54,478 ahead. The fresh thirty-year version saves more monthly but never reaches equity break-even and ends $31,431 behind. Same rate, same costs — the entire difference is whether you restart the clock. Ask specifically for a quote at your remaining term; lenders quote thirty years because the lower payment sells.

Why does the combined figure turn positive and then negative again?

Because the two loans end at different times. While both are running, the monthly saving accumulates and eventually overtakes the equity you gave up. But when your original loan would have finished, its payments stop entirely — and the new one carries on for however many years you added. On the example the old loan ends at month 264 while the new one still has eight years and $214,557 to run, which is what drags the position back down. A refinance with a matched term has no second crossing at all.

How far does the rate need to fall to be worth it?

The old rule about one percent is too crude to be useful, because it ignores the size of the loan, how far into it you are, and what term you take. A quarter point can be worth it on a large balance early in the loan; a full point may not be worth it on a small balance fifteen years in, where a reset gives away most of your progress. Put your own numbers in and read the equity line rather than reaching for a rule of thumb.

Should I roll the closing costs into the loan or pay them?

Paying in cash keeps the balance down and reaches the equity break-even sooner, but the money is gone at closing. Rolling them in preserves your cash and costs you interest on the fee for the whole term. The combined position barely differs — on the example, twenty-three months against twenty-six — so it is mostly a liquidity question rather than a financial one. If cash is tight, roll them; if not, paying them is marginally cleaner.

Is a no-cost refinance actually free?

No. The lender covers the closing costs and charges a higher rate for the whole term to pay for it. That suits someone who expects to move or refinance again soon, because they leave before the higher rate outruns the saved fee. Over a long hold it is considerably more expensive than paying the costs. Ask for both quotes — the rate with costs and the rate without — and compare them here rather than assuming the version with no fee attached is the cheaper one.

How soon after buying can I refinance?

Sooner than for a cash-out, and sometimes immediately. Rate-and-term refinances generally have no agency seasoning requirement, though individual lenders often impose their own of around six months, and government streamline programmes have their own waiting periods. There is one commercial catch worth knowing: if you refinance within roughly six months of closing, the original lender may have to repay its commission, so some will resist or add conditions.

Does refinancing hurt my credit score?

Slightly and briefly. The application creates a hard enquiry, and the new account lowers the average age of your credit, both of which knock a few points off temporarily. Rate shopping across several lenders inside a short window is normally treated as a single enquiry by the scoring models, so gathering quotes is not penalised the way people fear. The effect typically fades within a year and is small next to the interest at stake — it should not be the deciding factor either way.

Rate and Term Refinance Calculator

A rate-and-term refinance takes no money out. You swap one loan for another at a better rate, and the only question seems to be whether the closing costs pay back. That question has a comfortable answer and it is not the whole story. Take someone eight years into a $420,000 loan at 6.90%, owing $37...

This page is about what restarting the clock costs you in equity. For the straightforward payment-and-payback question, use the refinance calculator. If you want to take money out, that is a cash-out refinance instead.

THE LOAN YOU HAVE

ORIGINAL AMOUNT ($)

YOUR RATE (%)

ORIGINAL TERM (YRS)

YEARS PAID SO FAR

You owe $375,180 with 22 years to run, paying $2,766.12 a month.

THE LOAN ON OFFER

NEW RATE (%)

NEW TERM (YRS)

COSTS ($)

WHEN YOUR BALANCE CATCHES UP

never

Never, on a 30-year term. Restarting the clock throws away 8 years of amortisation, and the lower rate does not recover it before your original payoff date. The cash break-even — costs divided by the saving — is only 1y 3m.

NEW PAYMENT

$2,234.97

SAVES

$531.15

CASH BREAK-EVEN

1y 3m

You are giving up your place on the amortisation curve. On your current loan, 22% of each payment now goes to principal — you fought 8 years to get there. On the new loan at month one it is 18%, because a fresh schedule is front-loaded with interest all over again. The lower rate helps, but it starts from behind.

This refinance is good if you leave between 2y 2m and 17y 9m — and bad on either side. Counting the equity you surrender against the cash you save, you are ahead only inside that window. Hold to your original payoff date and you finish $31,431 behind, because your old loan would have ended at 22 years while the new one still has 8 years to run. A single break-even figure cannot express this.

Try matching the 22 years you have left. A 22-year term at 5.750% costs $2,559.76 a month — still $206.36 less than you pay now — and it keeps your original payoff date, so none of the progress is surrendered. Total interest falls from $421,608 to $292,798.

Balance today

$375,180

Time left

22 years

Payment now

$2,766.12

New loan

$382,980

New payment

$2,234.97

Monthly saving

$531.15

Cash break-even

1y 3m

Equity break-even

never

Ahead from

2y 2m

Behind again from

17y 9m

Principal share, old

22%

Principal share, new

18%

This is an estimate, not a quote. The combined figure assumes you keep the monthly saving rather than spending it — if it funds a larger lifestyle, only the equity line is real. It also compares against holding your current loan untouched, ignores any tax position, and takes no view on whether rates fall further. Rate-and-term refinances price better than cash-out ones, so keep the two separate when shopping.

THE RESET

This line is the equity you give up, offset by the cash you save. It is the right test because both are real — the balance comparison alone is too harsh, and the payment saving alone is too kind. Where it dips back below zero, the old loan has finished while the new one is still running.

Live calculation · updates as you type

Created with❤️byeaglecalculator.com

HOW TO USE

1
Enter your original loan and how far into it you are, not just the balance. The years already paid are what decides how much progress a reset gives away.
2
Enter the rate on offer and the term. Try a fresh thirty years first, then try matching what you have left — the difference is usually larger than the rate difference.
3
Read all three break-evens. If the equity figure says never, a reset is costing you more amortisation than the better rate recovers.
4
Check whether the combined line reverses. If it does, the refinance only pays inside a window, and holding the loan to the end puts you behind.

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Last updated: August 1, 2026 · Equity and combined positions measured to your original payoff date · Estimate only, not a quote.