Refinance Calculator
Refinancing only pays off if the savings outlast the fees. This free refinance calculator compares your old and new monthly payment, shows your monthly savings, and tells you how many months it takes to break even on the closing costs.
What is a refinance calculator?
A refinance calculator compares the monthly payment on your current mortgage with the payment on a new loan, so you can decide whether refinancing is worthwhile. When you refinance, you replace the existing loan with a new one — typically at a lower interest rate or a different term — and you usually pay closing costs to make the switch. The key question is whether the lower payment saves enough money to recover those fees before you sell or pay off the home.
This calculator applies the standard amortization formula to both loans, using your current balance, remaining term and old rate to find today's payment, then redoing the math with the new rate. The difference is your monthly savings. Dividing your closing costs by that saving gives your break-even point — the months needed to get your money back. If you stay in the home longer, refinancing generally pays off.
How to use
- Enter the current balance left on your mortgage.
- Enter the remaining term in years and your old interest rate.
- Enter the new interest rate you've been quoted.
- Add your estimated closing costs, then click Calculate Refinance.
- Compare the monthly savings with the break-even months to decide.
How refinance savings are calculated
Monthly payment = P × r × (1+r)^n / ((1+r)^n − 1)
Savings = old payment − new payment
Break-even months = closing costs ÷ monthly savings
Both payments use the same remaining term, so the difference in monthly cost comes purely from the change in interest rate.
Example
With the defaults — a $300,000 balance, 20 years left, an old rate of 5.5%, a new rate of 4.5% and $6,000 in closing costs — click Calculate Refinance. The old payment is about $2,064, the new payment is about $1,898, so you save roughly $166 a month. Dividing $6,000 by $166 gives a break-even of about 36 months — meaning you would need to stay in the home just over three years for the refinance to pay off.
Common use cases
- Rate-and-term refinance: lock a lower rate when market rates drop.
- Shortening a loan term: pay less total interest by trading the payment for a faster payoff.
- Removing PMI: refinance once you have enough equity to drop private mortgage insurance.
- Cash-out refinancing: tap home equity while rolling it into a new mortgage.
Pro tips
- Know your break-even: if you plan to move sooner than the break-even months, the refinance likely costs more than it saves.
- Compare the whole payment: remember to add escrow for tax and insurance to get your real monthly cost.
- The term matters: a shorter term can have a higher monthly payment yet save a lot of interest over time.
- Check for a points trade-off: paying points upfront lowers your rate and can shorten your break-even.
FAQ
What is refinancing?
Replacing your current home loan with a new one, usually to lower the rate, change the term, or access home equity.
How is the monthly payment calculated?
PMT = P × r × (1+r)^n / ((1+r)^n − 1), where r is the monthly rate and n is the number of monthly payments.
What is a break-even point?
The point where your savings cover the closing costs. It equals closing costs divided by monthly savings.
Is refinancing always worth it?
No. If you move before the break-even point, the closing costs outweigh the savings, so the refinance may not make sense.
Do I have to extend my term?
Depends on the new loan. A longer term lowers the payment but adds interest; a shorter term raises it but cuts total interest.
What closing costs should I enter?
The total fees you expect: lender fees, title insurance, appraisal and points. These drive the break-even calculation.
How low do rates need to go?
No fixed rule — a drop of about half to one percentage point is often enough to make a refinance worth evaluating.
Does it include property tax and insurance?
No. It covers principal and interest only, so add your escrow for tax and insurance for a full payment.
Will refinancing affect my credit?
A refinance triggers a hard inquiry and a new loan, which can cause a temporary, small dip in your credit score.
Is this refinance calculator free?
Yes. It runs entirely in your browser and no data is uploaded anywhere.
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