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Refinance Calculator
A refinance calculator tells you whether replacing your current mortgage with a new one actually saves you money. Enter your loan balance, your current rate and remaining term, the new rate and term, and the closing costs, and it shows your new monthly payment, how much you save each month, and how many months it takes for those savings to pay back the closing costs.
| Current monthly payment | |
| New monthly payment | |
| Monthly savings | |
| Break-even point |
How it works
Refinancing means taking out a brand-new mortgage to pay off the old one. Homeowners usually do it to get a lower interest rate, which cuts the monthly payment, or to switch from an adjustable rate to a fixed rate, or to shorten the loan term. The catch is that a refinance is not free: lenders charge closing costs, typically 2% to 5% of the loan amount, for the appraisal, title work, and origination fee.
Your current loan balance is what you still owe, not the original loan amount. The current rate and remaining years describe the mortgage you have now. The new rate and new term describe the loan you are considering, and the closing costs are what you pay up front to get it. The calculator works out both monthly payments with the standard amortization formula, then compares them:
where r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments.
Monthly savings = Current payment − New payment
Break-even months = Closing costs ÷ Monthly savings
The break-even point is the key number. If it takes 20 months to recover the closing costs and you plan to stay in the home for ten more years, refinancing is a clear win. If you might move in a year, you will never recover the costs, and refinancing loses money. Also watch the total interest: a new 30-year loan replacing a mortgage with 20 years left lowers the payment but stretches out the debt, so you can end up paying more interest overall even while the monthly payment falls.
Worked example
The Miller family in Columbus, Ohio, owes $300,000 on their mortgage at 7.5% with 30 years left. Their lender offers a refinance at 6.0% for a new 30-year term, with $6,000 in closing costs. Is it worth it?
First, the current payment. The monthly rate is 7.5% ÷ 12 = 0.625%, over 360 payments, which gives a monthly payment of $2,097.64. The new payment at 6.0% over 360 payments is $1,798.65 a month. The monthly savings are $2,097.64 − $1,798.65 = $298.99.
Now the break-even point: $6,000 in closing costs ÷ $298.99 a month = 20.1 months. So after about 20 months — the costs are fully recovered during the 21st month — every dollar saved is real money in the Millers' pocket. Over five years in total, they would save about $298.99 × 60 = $17,939, and after subtracting the $6,000 in closing costs, the net gain is about $11,939. Because they plan to stay in the house for at least another decade, this refinance is a good deal for them.
FAQ
When does refinancing make sense?
Refinancing usually makes sense when the new rate is at least 0.5 to 1 percentage point lower than your current rate, your credit score has improved, and you plan to stay in the home past the break-even point. If you might move in a year or two, the closing costs usually wipe out the savings.
What is the break-even point on a refinance?
The break-even point is the number of months it takes for your monthly savings to add up to the closing costs you paid. Divide the closing costs by the monthly savings: $6,000 in costs divided by $300 a month in savings is a 20-month break-even. After that month, the savings are pure gain.
What are typical closing costs for a refinance?
Closing costs on a refinance in the US are usually 2% to 5% of the loan amount, covering the appraisal, title search, origination fee, and other lender charges. On a $300,000 loan that is roughly $6,000 to $15,000, though some lenders offer no-closing-cost refinances with a slightly higher rate instead.
Does refinancing restart my mortgage clock?
Yes, if you take a new 30-year loan to replace a mortgage with 22 years left, you add 8 years of payments. Your monthly payment drops, but you may pay more total interest over the life of the loan. Ask your lender about a term that matches your remaining years, or keep paying your old payment amount on the new loan to pay it off faster.