Refinance Calculator
Compare your current mortgage to a new one. See monthly savings, break-even, and lifetime cost — with a refinance / don’t-refinance verdict.
Estimates only. Actual closing costs, escrow setup, prepayment penalties, and rate offers vary by lender. This calculator excludes property tax, insurance, and PMI changes. See methodology.
What this calculator does
It compares your existing mortgage against a hypothetical new one. You enter the current balance, rate, and years remaining, plus the new rate, term, and closing costs. The calculator returns four numbers that matter: monthly savings, break-even (how long it takes for the savings to repay the closing costs), total interest under each loan, and lifetime savings.
It also delivers a verdict — refinance, maybe, or don’t — based on whether the math actually adds up. A lower monthly payment alone is not always a good reason to refinance. The total picture matters.
The two questions a refinance has to answer
First: am I saving money each month? If the new payment is higher than the old one, the only valid reasons to refinance are switching from an adjustable-rate to fixed (eliminating future rate risk) or extending the term to lower the payment for legitimate cash-flow reasons. Outside those cases, a higher payment defeats the purpose.
Second: am I saving money over the life of the loan? This is where people get tripped up. Refinancing a 30-year mortgage with 22 years left into a fresh 30-year mortgage will probably reduce the monthly payment — but you just signed up for 8 more years of payments. The total interest can go up dramatically even though the monthly went down.
The lifetime-savings number this calculator shows is the right one to focus on. If it’s positive, you’re actually ahead. If it’s negative, you’re trading short-term cash flow for long-term cost.
Break-even — the most important refinance number
Closing costs on a refinance typically run 2–5% of the loan balance, so $4,000–$15,000 on a typical loan. The break-even calculation is simple: closing costs divided by monthly savings. If you save $200/month and the refinance costs $5,000, you break even at 25 months — about 2 years.
That number tells you the minimum time you need to stay in the home (or stay on this loan, if you don’t plan to refinance again) for the deal to be worthwhile. A common framework:
- Under 2 years: excellent; refinance even with moderate uncertainty about staying.
- 2–5 years: good if you’re confident you’ll be in the home that long.
- 5–7 years: marginal; only refinance if you’re sure of long-term plans.
- Over 7 years: usually skip; the savings are too far out and life changes intervene.
When refinancing into a shorter term is the smart move
If rates have dropped meaningfully and your income has grown since your original mortgage, refinancing from a 30-year into a 15-year can be a major win. You absorb a modest payment increase (sometimes none, depending on the rate gap) but cut total interest dramatically and shave 15 years off your payoff date. On a $300,000 balance at 7% with 25 years left, refinancing to a 15-year at 5.75% raises the monthly from roughly $2,100 to $2,490 — but cuts lifetime interest from about $330,000 to $148,000. That’s a $182,000 lifetime gain for $390/month more.
This is the kind of refinance where the “break even” number is less relevant. You’re paying off the loan years sooner, so closing costs are recouped many times over in interest savings even if monthly cash flow is similar.
Why refinancing exists in the first place
When you take out a mortgage, you’re locking in an interest rate that lasts 15–30 years. But interest rates change all the time — the Federal Reserve adjusts short-term rates, and longer-term mortgage rates respond. If rates drop a year or two after you bought the house, you’re stuck paying the higher rate unless you refinance — which means replacing your old loan with a new one at the better rate.
It costs money to do this (closing costs again), so it only makes sense when the new rate saves enough to cover those costs and then some. The math in this calculator shows whether the deal is actually a deal.
Things this calculator does not model
Rate locks expiring. The rate you see in a quote is usually only valid for 30–60 days. If your closing is delayed, the rate can change. Always lock the rate when you’re confident the deal will close.
Property value changes. Lenders typically require an appraisal for a refinance. If your home has lost value, you may not qualify for the rate you want, or you may face PMI again if your equity slipped below 20%.
Tax effects. Mortgage interest is deductible for itemizers, so a lower interest payment slightly reduces a tax deduction. The effect is small for most households (especially since the standard deduction increase in 2018) but worth noting.
Mortgage insurance changes. If you’ve built enough equity to drop PMI on the new loan, that’s additional savings the calculator doesn’t include. If you’re re-adding PMI by refinancing while your equity is still under 20%, the calculator also doesn’t include that cost.
Related calculators
- Mortgage calculator — full PITI breakdown for a new home loan.
- Compound interest visualizer — what monthly savings could become if invested.
Frequently asked questions
What rate drop makes refinancing worth it?
The traditional rule of thumb is at least 0.75–1% lower than your current rate, but it depends on closing costs and how long you plan to stay. A 0.5% drop on a large loan with low closing costs can be worthwhile. A 1.5% drop on a small balance with high closing costs may not break even before you sell. The break-even number this calculator produces — months to recoup closing costs from monthly savings — is the right number to focus on, not the headline rate change.
What is the break-even point and why does it matter?
Break-even is closing costs divided by monthly savings — how many months it takes for the lower payment to repay what you spent on the refinance. If closing costs are $5,000 and you save $200/month, break-even is 25 months. If you sell or refinance again before that, you lose money. If you stay 5+ years, you save substantially. As a planning rule: under 24 months is great, 24–60 is acceptable if you’re confident you’ll stay, over 60 is rarely worth it.
Why does my new monthly payment go down even when total interest goes up?
Because resetting the term spreads payments over a longer period. A 30-year loan with 22 years left, refinanced into a fresh 30-year, will have a lower monthly payment even at the same rate — but you’re now paying for 8 extra years. To get true savings (lower monthly AND lower lifetime cost), refinance into a term shorter than or equal to your remaining years. Many lenders offer custom terms (like 22 or 25 years) specifically to avoid this trap.
Should I roll closing costs into the loan?
Rolling closing costs in (a no-cash-out refinance) means you don’t write a check at closing, but you pay interest on those costs for 15–30 years. On $5,000 in closing costs at 6% over 30 years, you’ll pay roughly $5,800 in additional interest. Paying upfront is almost always cheaper if you have the cash. The exception: if not rolling them in means delaying the refinance and missing the rate window, the math can favor rolling them in.
Are there reasons not to refinance even when the math says yes?
A few. First, if you’re close to paying off the loan, the savings window is small and closing costs eat most of it. Second, if you’re planning to move within 1–3 years, you may not break even. Third, refinancing resets the amortization clock — if you’re 10 years into a 30-year loan and refinance into another 30-year, you’ve now committed to paying for 40 total years even if your monthly drops. Fourth, some loans have prepayment penalties that wipe out the savings.
What about cash-out refinancing?
A cash-out refi increases your loan balance to extract equity as cash. The math here only models a rate-and-term refinance (same balance or balance + closing costs). Cash-out refinances charge slightly higher rates and have additional fees, so they’re a different product. They can make sense for high-value uses like home improvements that increase property value, but they’re an expensive way to fund consumer spending — you’re putting unsecured costs onto a 30-year secured loan.
How accurate is the closing cost estimate?
Closing costs typically run 2–5% of the new loan balance, which means $4,000–$15,000 on a $300,000 refinance. They include lender origination fees, title insurance, appraisal, recording fees, and prepaid escrow. The exact number depends on your state, lender, and loan type. Always get a Loan Estimate (a standardized federal form) from at least two lenders and compare line by line. Many lenders offer “no-closing-cost” refinances by raising the rate slightly — the cost is hidden, not absent.