Mortgage Refinance Calculator

What Is the Mortgage Refinance Calculator?

Refinancing isn't automatically worth it just because a new rate looks lower -- closing costs on the new loan need to be recouped through monthly savings before the refinance actually pays off. This calculator compares your current payment against a prospective new loan's payment, and calculates exactly how many months of savings it takes to break even on the refinance's closing costs.

How to Use This Calculator

Enter your current loan balance, current rate, and remaining term, plus the new rate, new term, and closing costs you'd pay to refinance.

The Formula

Worked Example

Important Notes

Step-by-Step: Getting Accurate Inputs

The comparison is only as reliable as the numbers you enter. Start with the current balance from your latest statement, not the original loan amount, and use the remaining months on your loan expressed as a term, not the original term. Then enter the new rate from an actual written quote if you have one, since rates advertised online often assume a strong credit score and points paid upfront. Finally, enter the total closing costs on the new loan, including origination, appraisal, title work, and recording fees. Your lender's Loan Estimate lists these in a standard format so you can copy the total directly.

Deciding Whether Break-Even Is Good Enough

A short break-even is attractive, but the right threshold depends on your plans. If your break-even is about a year and you expect to stay in the home for many more years, the savings are likely to outweigh the costs. If it is closer to four or five years and you might relocate for work, the refinance is riskier. Consider also whether you might refinance again if rates fall further, since each new refinance restarts the clock on recovering closing costs.

Hypothetical Example of the Term Trap

Imagine a $300,000 balance at 7% with 25 years left. The payment is about $2,120 and the remaining interest is roughly $336,000. Refinancing to 5.5% for 30 years drops the payment to about $1,703, which looks like a big monthly win. But total interest over the new schedule is roughly $313,000, and you would spend five extra years making payments. If you refinanced to 5.5% for 25 years instead, the payment would be about $1,842, still lower than today, with far less interest overall. Running both term choices in the calculator makes this tradeoff visible, even though the tool itself focuses on payment and break-even.

Costs and Situations the Calculator Does Not Capture

• Cash-out refinancing, where you borrow more than your current balance. Enter the new balance if you plan to do this, but note that the extra cash also changes your real cost.
• Rolling closing costs into the new loan. If you do, the new balance is higher, so use that figure for the comparison.
• Changes in property tax, insurance, or mortgage insurance, which are separate from principal and interest.
• Tax effects such as mortgage interest deductions. A tax professional can tell you whether they apply to your situation.

When a Refinance Makes Sense Beyond the Rate

People refinance for reasons other than a lower rate, such as switching from an adjustable rate to a fixed rate, removing a co-borrower, or ending mortgage insurance once equity has grown. In those cases the monthly savings may be small or even negative, and break-even is not the whole story. Use the calculator to quantify the payment change, then weigh the non-financial benefits separately.

Frequently Asked Questions