Mortgage Refinance Calculator
Compare your existing mortgage against a proposed new one, including closing costs, and find the point at which the switch pays for itself.
What this calculator does
This refinance calculator compares your existing mortgage against a proposed new one and shows whether the switch actually saves money. Enter your current balance, rate, and remaining term alongside the new rate, term, and closing costs, and it returns the change in monthly payment, the difference in total interest, and the break-even point.
The break-even figure is the one that decides it. A lower monthly payment always looks like a win, but refinancing carries real upfront costs and often resets the clock on your term. Break-even tells you how long you must stay for the deal to be worth doing.
When to use it
The obvious trigger is a fall in market rates, but there are others. Refinancing to a shorter term converts a rate saving into a much larger interest saving. Moving from an adjustable-rate loan to a fixed one buys certainty. Improved credit since your original loan may unlock better pricing even without market movement.
It is equally valuable for deciding against refinancing. Running the numbers on a modest rate drop against several thousand in closing costs often shows a break-even three or four years out, which is a clear answer if you might move sooner.
Understanding the inputs
Your current balance is the payoff figure, not the original loan amount. Remaining term matters as much as the rate: comparing a new 30-year loan against 22 years remaining on your existing one is not a like-for-like comparison, and the totals will mislead you if you treat it as one.
Closing costs should include origination, appraisal, title, and recording fees. If you are offered a no-closing-cost refinance, enter zero here but use the higher rate that comes with it — the cost has moved, not disappeared. Enter the new rate as quoted rather than the APR.
How is this calculated?
Compare current monthly payment against new payment. Break-even = Closing Costs / Monthly Savings.
A worked example
Suppose you owe $280,000 at 7.25 percent with 26 years remaining, paying about $2,010 a month. Refinancing into a new 30-year loan at 6.25 percent drops the payment to roughly $1,724, saving $286 a month. With $7,500 in closing costs, break-even arrives at about 26 months.
But the new term runs four years longer than what remained. Total interest on the refinanced loan comes to roughly $340,000 against about $347,000 on the existing one — a saving of only $7,000 despite the lower rate. Refinancing into a 25-year term instead keeps the payment near $1,847 and cuts total interest to about $274,000.
Limitations and assumptions
This calculator compares principal and interest only. It excludes escrow, property taxes, and insurance, which transfer to the new loan largely unchanged. It assumes both loans are fixed-rate and that you make scheduled payments without overpaying.
It does not model cash-out refinances, where the balance increases, nor does it account for the tax treatment of mortgage interest, which can alter the effective saving. Rate quotes are not guaranteed until locked, and the Loan Estimate your lender must provide is the authoritative statement of costs.
Common Questions
- How do I know if refinancing is worth it?
- Compare the total closing costs against your monthly saving to find the break-even point in months. If you expect to stay in the home comfortably beyond that point, refinancing pays. If you might move before it, you lose money even though the monthly payment fell.
- What does refinancing cost?
- Typically 2 to 5 percent of the loan amount, covering origination, appraisal, title insurance, and recording fees. On a $300,000 refinance that is $6,000 to $15,000. Some lenders offer no-closing-cost refinances, which do not remove the cost but fold it into a higher rate or a larger balance.
- How much of a rate drop justifies refinancing?
- The old rule of thumb was one percent, but it is a poor guide because it ignores loan size and how long you will stay. On a large balance, half a point can break even in under two years; on a small balance, two points may not be worth the paperwork. Use the break-even calculation instead.
- Will refinancing restart my loan term?
- By default yes, and this is the most commonly overlooked cost. Refinancing into a fresh 30-year term after eight years of payments means 38 years of interest in total. A lower rate on a longer term can still increase what you pay overall — refinancing into a 20 or 15-year term avoids this.
- What is a cash-out refinance?
- You replace your existing mortgage with a larger one and take the difference in cash, secured against your home equity. Rates run slightly higher than a rate-and-term refinance and most lenders require you to retain at least 20 percent equity. It converts unsecured borrowing into debt secured on your house.
- Does refinancing hurt my credit score?
- Slightly and temporarily. The hard inquiry and the new account lower your score by a few points, and closing a long-standing mortgage shortens your average account age. Multiple mortgage inquiries within a 45-day window count as one, so shopping several lenders costs no more than approaching one.
- Can I refinance with little equity?
- It is harder but not impossible. Most conventional refinances want 20 percent equity to avoid mortgage insurance, though FHA and VA streamline programs allow refinancing with minimal equity and reduced documentation. If you are underwater, specialised programs are the only route.
- Should I refinance to remove PMI?
- Often unnecessary. If you have a conventional loan, PMI must be cancelled on request at 20 percent equity and automatically at 22 percent, with no refinance needed. The exception is an FHA loan, where insurance usually runs for the full term — there, refinancing to conventional is the standard route out.
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