Mortgage Refinance Calculator
Compare your current mortgage to a new refinanced loan with a full side-by-side break-even analysis.
Last reviewed: May 2026Current Loan
New (Refinanced) Loan
Side-by-Side Comparison
| Current Loan | Refinanced Loan | |
|---|---|---|
| Monthly Payment | - | - |
| Remaining Interest | - | - |
| Total Remaining Cost | - | - |
| Loan Term | - | - |
Quick Answer
Refinancing replaces your mortgage with a new loan, ideally at a lower rate. The key number is the break-even point: closing costs divided by monthly savings. If refinancing costs $4,000 and saves $200 a month, you break even in 20 months — worth it only if you keep the loan longer than that. Enter your current and new terms above.
This refinance calculator answers one question: would replacing your current mortgage with a new loan at a different rate or term actually save you money once closing costs are paid? Enter your current balance, rate, and months remaining alongside the new rate, new term, and closing-cost estimate; the calculator returns the monthly savings, the month at which you break even on the up-front costs, and the lifetime interest savings or losses. The detailed sections below explain how each figure is computed, where the math hides traps, and when a textbook-cheap refinance still costs you more than staying put.
What This Calculator Does
The mortgage refinance calculator performs a complete break-even analysis between two amortizing loans: the loan you currently hold and the loan you are considering replacing it with. It is not a "what would my payment be" tool — it is a comparison engine. The output answers three concrete questions that drive every refinance decision.
First, what is the monthly payment difference? The calculator computes the principal-and-interest payment on your current loan using the standard amortization formula and the remaining months on your existing schedule, then computes the principal-and-interest payment on the proposed new loan over the new term. The difference is your monthly savings (or, if you are shortening the term, your monthly payment increase).
Second, how many months does it take to recover the closing costs? Refinancing is not free. Lender origination fees, title insurance, appraisal, escrow setup, recording fees, and prepaid interest typically run 2 to 5 percent of the loan balance. The calculator divides total closing costs by monthly savings to produce the break-even month: the point at which the cumulative monthly savings equal the up-front cash you spent.
Third, what is the lifetime interest difference? Even when monthly savings are real, restarting amortization on a long new term can erase those savings by extending the period over which you pay interest. The calculator multiplies each loan's payment by its remaining months, subtracts the principal in both cases, and shows the total remaining interest under each scenario. The net savings figure subtracts closing costs from the interest delta and labels the result with a verdict — strongly recommended, worth considering, marginal, or not recommended — based on the size of the net dollar benefit.
Underneath the verdict, the side-by-side table lays out monthly payment, remaining interest, total remaining cost, and remaining term for both loans, so you can audit every assumption the calculator made. The point of the tool is not to give you a yes-or-no answer in isolation; it is to expose all the numbers a competent loan officer should walk you through, so you can verify them yourself.
How to Use It
Start with your current loan in the top section. The Remaining Balance field is the principal you still owe today — find this on your most recent monthly mortgage statement under "principal balance" or "unpaid balance," not "original loan amount." If your statement shows a payoff quote rather than a current balance, use the current balance figure; payoff quotes include accrued interest through a future date and will overstate the principal for break-even purposes.
The Current Interest Rate is the note rate on your existing loan — the rate printed on page 1 of your closing documents and on every monthly statement. Do not enter the APR, which folds origination fees into the rate and would distort the comparison. Enter the nominal annual rate, e.g., 6.875 for a 6.875% loan.
The Remaining Term field is the number of months left on your current loan, not the original term. If you took out a 30-year mortgage 6 years ago, your remaining term is 24 years × 12 = 288 months. If you have been making extra principal payments and are ahead of schedule, your remaining term may be less than the original schedule suggests — check your statement's "amortization schedule" or call your servicer.
In the new-loan section, the New Interest Rate is the par rate the lender has quoted on the new loan. If the lender is offering a no-closing-cost option at a higher rate, model that rate here separately and compare results. The New Loan Term is in years (not months); typical options are 30, 20, 15, and 10. Many borrowers default to 30 because it minimizes payment, but if your goal is to save lifetime interest, shorter terms produce dramatically larger results — sometimes turning a marginal refinance into a strong one.
The Closing Costs field should reflect your best estimate of total out-of-pocket fees on the new loan: lender fees (origination, underwriting, processing), third-party fees (appraisal $400-700, title insurance $1,500-3,000, recording $50-300, escrow setup), and prepaid items (interest from closing through month-end, initial escrow funding for taxes and insurance). On a $300,000 refinance, $5,000-$10,000 is a realistic range. Always request a Loan Estimate from the lender before relying on a number; LE Section A and B together are the closing-cost figure you want.
Once you enter all six fields the calculator updates live. Read the monthly savings number first, then jump to the break-even month — if break-even is past your expected hold period, the refinance is probably a loss even when monthly payments shrink. The verdict box at the bottom synthesizes everything; treat its output as a starting point for a conversation with your loan officer, not a final answer.
Worked Example: Rate-Drop Refinance That Pays Off
Imagine you took out a 30-year fixed-rate mortgage 6 years ago for $360,000 at 6.875%. Today your remaining balance is $312,400, you have 24 years (288 months) remaining, and rates have fallen. A local lender quotes you a new 30-year fixed at 5.625% with $4,200 in total closing costs. Should you refinance?
Step 1 — Compute the Current Loan Payment
Plug your current loan into the amortization formula: P = $312,400, r = 6.875% ÷ 12 = 0.005729, n = 288. Working through the math, (1.005729)288 ≈ 5.196. Numerator = 312,400 × 0.005729 × 5.196 ≈ 9,299. Denominator = 5.196 − 1 = 4.196. M ≈ $2,216/month. Across all 288 remaining months the total cost is $2,216 × 288 ≈ $638,200, of which $312,400 is principal repayment and approximately $325,800 is remaining interest.
Step 2 — Compute the New Loan Payment
The new loan refinances the same $312,400 balance, just at the lower rate and a fresh 30-year (360-month) schedule: P = $312,400, r = 5.625% ÷ 12 = 0.004688, n = 360. (1.004688)360 ≈ 5.397. Numerator = 312,400 × 0.004688 × 5.397 ≈ 7,903. Denominator = 5.397 − 1 = 4.397. M ≈ $1,797/month. Over the full new 360-month term, total cost is $1,797 × 360 ≈ $647,000, of which $334,600 is interest.
Step 3 — Calculate Monthly Savings and Break-Even
Monthly savings = $2,216 − $1,797 = $419/month. Break-even months = closing costs ÷ monthly savings = $4,200 ÷ $419 ≈ 10.0 months. If you stay in the home at least 10 months after closing, you recoup every dollar of the $4,200 you spent at closing. Anything past month 10 is pure cash-flow benefit.
Step 4 — Evaluate Lifetime Interest
Total interest on the current loan over its remaining 288 months: $325,800. Total interest on the new loan over 360 months: $334,600. At first glance the new loan costs $8,800 more in lifetime interest — even though the rate is 1.25% lower — because the term has been stretched back out from 288 months to 360 months. This is the most-missed trap in refinance math.
If you make the new payment exactly the way the calculator suggests, you save $419/month but pay an extra 72 months of interest. The fix: take the new lower payment but voluntarily pay $419 extra toward principal each month. The total monthly outlay returns to $2,216 (matching your old payment), but at the new lower rate, the loan pays off in roughly 232 months — 56 months earlier than the old schedule — and total interest drops to approximately $199,900, a true savings of $125,900 versus staying with the old loan. The verdict label in the calculator would read "Strongly recommended" in this scenario.
Counter-Example: When the Same Refinance Is a Bad Deal
Now change the scenario: you have only 3 years (36 months) remaining on the same original loan, your balance is $48,000, and the lender quotes $9,000 in closing costs on a refinance to a fresh 30-year at 5.625%. Current payment: at 6.875% with $48,000 over 36 months ≈ $1,477/month. New payment: at 5.625% with $48,000 over 360 months ≈ $276/month. Monthly savings = $1,477 − $276 = $1,201. Break-even = $9,000 ÷ $1,201 ≈ 7.5 months.
On paper the break-even looks great. But total cost tells a very different story: the old loan finishes in 3 years with about $5,170 in remaining interest. The new loan stretches the same balance over 30 years and racks up roughly $51,100 in interest plus $9,000 in closing costs = $60,100 in additional cost versus $5,170 for the old loan — a net loss of $54,930. The refinance turns a nearly-paid-off mortgage into a brand-new 30-year obligation. The calculator's verdict would be "Not recommended at these terms," and any honest loan officer should refuse the file.
Common Refinance Scenarios
Refinancing covers a wider range of strategies than most homeowners realize. The calculator handles all of them, but each scenario has its own evaluation criteria.
Rate-and-Term Refinance (The Most Common)
This is the textbook refinance: rates have dropped, you replace your current loan with a new loan at a lower rate, same or similar term, same balance. The calculator's default behavior models this exactly. Use the break-even month as your primary decision metric, with a typical target of 36 months or less if you plan to stay in the home long term. If your current rate is more than 0.75% above today's prevailing rate and you plan to stay at least 5 years, this scenario usually wins. The math in the worked example above represents a textbook rate-and-term scenario.
Cash-Out Refinance
A cash-out refinance replaces your existing loan with a larger one and gives you the difference in cash. If you owe $250,000 and refinance into a $300,000 loan, you walk away with $50,000 minus closing costs. Common uses: home renovation, college tuition, debt consolidation. The calculator does not directly model the cash-out portion, but you can approximate it by entering the new (larger) balance as the principal on the new loan side, then evaluating whether the cash you receive is worth the increased monthly payment and lifetime interest. Cash-out rates typically run 0.125% to 0.50% higher than rate-and-term rates, and lenders cap most cash-out refinances at 80% loan-to-value. The cash is also not free — you are converting equity into debt at a current market rate.
Term Shortening (30 → 15)
Refinancing from a 30-year into a 15-year fixed at a lower rate is the most aggressive interest-saving refinance available. Even with closing costs, the lifetime interest savings can be enormous: on a $250,000 loan at 6.5% vs. a new 15-year at 5.5%, total interest falls from roughly $317,000 to $116,000 — a $201,000 swing — at the cost of a higher monthly payment ($1,580 to $2,044, a $464 increase). Use the calculator with newTerm = 15 to model this. The decision becomes a budgeting question: can you afford the higher payment without straining other goals (retirement contributions, emergency reserves, children's tuition)? Term shortening is the right move only if the higher payment is genuinely affordable; otherwise you can replicate most of the savings by simply paying extra principal on a 30-year loan, which preserves flexibility if your income falls.
Removing PMI After 20% Equity
If your home has appreciated and your loan balance has fallen to 80% LTV or lower, you can use a refinance to eliminate private mortgage insurance — even at a similar interest rate. On a $300,000 loan with $200/month PMI, dropping PMI alone saves $2,400/year. Closing costs of $5,000 break even in 25 months purely from PMI savings, before any rate-related benefit. Note: under the Homeowners Protection Act of 1998, your servicer is required to automatically cancel PMI when your balance reaches 78% LTV of the original appraised value, and you can request cancellation at 80% — neither of which requires a refinance. Refinancing for PMI removal only makes sense when the home has appreciated significantly past the original purchase price (so the original-LTV trigger has not yet been reached but the current-value LTV is favorable).
Switching from ARM to Fixed
Adjustable-rate mortgages reset annually after their initial fixed period (commonly 5, 7, or 10 years). When the reset window approaches and prevailing fixed rates are reasonable, refinancing into a fixed-rate loan eliminates future reset risk. The math here is not just about today's savings — it is about avoiding the upside scenario where your ARM resets to 8% or 9% in a high-rate environment. Use the calculator with both your current ARM rate and the new fixed rate, but interpret the verdict conservatively: a refinance that breaks even at 48 months may still be the right choice if your ARM is about to reset to a much higher rate. Stress-test by running the calculator a second time using the ARM's lifetime cap rate as the "current rate" — if even the cap scenario produces a slow break-even on the fixed refinance, fine, your ARM is well-priced. If the cap scenario flips the verdict, lock the fixed rate now.
Edge Cases and Gotchas
The break-even formula is mathematically simple, but five distinct issues regularly invalidate the headline savings figure. Skip past any of these at your peril.
Resetting Amortization Heaviness
Mortgages are front-loaded with interest. In month 1 of a 30-year loan, roughly 70 to 80 percent of your payment goes to interest and only 20 to 30 percent to principal. The crossover point — where principal exceeds interest in each payment — typically arrives around year 16 to 18. When you refinance into a new 30-year loan, you return to month 1 of that interest-heavy curve. Even if the new rate is lower, you have just thrown away years of amortization progress. The fix demonstrated in the worked example — keeping the new loan's lower rate but matching your old payment with voluntary extra principal — preserves both the rate benefit and the amortization progress. Always look at total lifetime interest, not just monthly savings.
Closing Costs Rolled Into the New Loan
Lenders frequently offer to roll closing costs into the new loan balance, which makes the refinance appear cash-neutral. This is the single biggest distortion of break-even math because the "savings" the calculator shows are now servicing a larger balance for 30 years. If you finance $5,000 of closing costs into a 30-year loan at 5.625%, you pay roughly $5,400 in additional interest over the life of the loan. The break-even month shown in the calculator assumes you paid those closing costs in cash; if you rolled them in, the true break-even is roughly 25 to 35 percent longer. The cleaner way to use the calculator: enter the cash closing-cost amount in the field, and treat the new loan balance as if you wrote a check for closing. Then separately compute whether you would rather pay cash or finance — but do not mix the two analyses.
Prepayment Penalties on the Old Loan
Most conventional mortgages originated after January 10, 2014, are Qualified Mortgages under the Dodd-Frank Act and cannot carry prepayment penalties. Most FHA and VA loans are also penalty-free. But non-QM loans, jumbo loans, and some portfolio loans may include prepayment penalties in the first 2 to 5 years — typically structured as 1 to 3 percent of the prepaid balance. On a $300,000 balance, that is $3,000 to $9,000 in additional refinance cost that the calculator's closing-cost field would need to absorb. Read Section 5 of your existing loan note (the "Borrower's Right to Prepay" section) before assuming penalty-free payoff, and ask your servicer for a written payoff quote that breaks out any prepayment penalty separately.
Lost Mortgage Interest Deduction When Standard Deduction Wins
If you itemize and deduct mortgage interest on Schedule A, you should reduce the calculator's interest-savings figure by your marginal tax rate to get the true after-tax benefit. But since the 2017 Tax Cuts and Jobs Act raised the standard deduction substantially (2024: $14,600 single, $29,200 married filing jointly), most middle-income borrowers no longer itemize. In that case, the interest you pay is not deductible at all — the calculator's pre-tax interest savings is the actual savings. The trap goes the other direction: a refinance into a shorter term means less total interest paid but also less interest available to deduct, which can flip you from itemizing to standard deduction or reduce your itemized total. Estimate both scenarios in your tax software before making the call.
Lender-Paid vs. Borrower-Paid Closing Costs
Lenders frequently offer a "no closing cost" or "lender credit" option that pays your closing costs in exchange for a higher interest rate — typically 0.25% to 0.50% above the par rate. The closing-cost field would be near zero, but the new rate field would be higher. Run the calculator both ways: once at par rate with cash closing costs, once at lender-paid rate with zero closing costs, and compare net savings under your expected hold period. A no-closing-cost refinance often wins for borrowers expecting to refinance again or sell within 3 to 5 years; the par-rate-with-cash option typically wins for longer hold periods. Some lenders bundle their fees so opaquely that even the Loan Estimate does not clearly show the par-rate alternative — always ask for both quotes explicitly.
The Refinance Formula
The math the calculator runs comes down to two equations plus a comparison.
Monthly Payment for Each Loan
Both the old and new monthly principal-and-interest payments come from the same standard amortization formula used for any fixed-rate mortgage:
M = P × [r(1+r)^n] / [(1+r)^n − 1]where M is monthly payment, P is the loan principal, r is the monthly periodic rate (annual rate ÷ 12 ÷ 100), and n is the number of monthly payments remaining on the schedule. The calculator runs this twice — once for the current loan using your remaining balance and remaining months, once for the new loan using the same balance over the new term.
Break-Even in Months
Once you have both payments, the break-even point on closing costs is:
Break-even months = Total closing costs ÷ (Old monthly P&I − New monthly P&I)This formula assumes the monthly P&I savings is positive (the new payment is lower than the old) and that you pay closing costs in cash at closing. If you stay in the home for at least that many months past closing, you recoup every dollar of the closing-cost outlay through the lower payments. Past the break-even month, every additional month produces pure cash-flow savings.
Total Lifetime Interest Saved
The cash-flow break-even is only half the picture. Total interest saved over the life of both loans is:
Interest saved = (Old months remaining × Old payment − Old balance) − (New months × New payment − New balance) − Closing costswhere Old balance and New balance are identical (you are refinancing the same principal). This simplifies to:
Interest saved = (Old months × Old payment) − (New months × New payment) − Closing costsA positive result means the refinance saves money over the loan's full life. A negative result means even though monthly payments fall, total dollars out increase — typically because the new term has stretched amortization back out.
Why the "1% Rate Drop" Rule of Thumb Fails
Many financial blogs and old-school loan officers cite a rule of thumb: "if rates have dropped 1% or more, refinance." This heuristic is incomplete in two consequential ways. First, it ignores closing costs entirely. A 1% rate drop on a $150,000 balance produces about $90/month in P&I savings; on $6,000 in closing costs that is a 67-month break-even — more than 5 years. If you plan to move in 4 years, the refinance loses money. Second, the rule ignores remaining term. A 1% drop with 24 years remaining produces dramatically different lifetime interest math than the same 1% drop with 4 years remaining. The calculator's break-even-and-net-savings approach replaces the rule of thumb with actual numbers specific to your situation — always trust the math over the heuristic.
Limitations
The calculator's assumptions are deliberately simple so the output stays auditable. Several real-world variables sit outside the model and require manual consideration before you finalize a refinance decision.
Assumes you stay past break-even. The break-even month is the floor for value. If you sell, relocate, or refinance again before that month, you have not recovered the closing-cost outlay. Mortgage industry data shows the average homeowner stays in a home about 8 years, but the median is much shorter when you account for relocation, divorce, and job changes. Be honest about how long you actually expect to hold the property before relying on a 36-month-plus break-even.
Ignores opportunity cost on closing-cost cash. The $4,200 you spend at closing could instead be invested. If the market returns 7% annually and your break-even on the refinance is 36 months, the calculator credits you with $419/month in savings but does not subtract the foregone investment growth on the closing-cost cash. For most refinances this is a second-order effect — the rate-spread savings dominate — but for marginal refinances it can swing the verdict.
Ignores tax implications. Mortgage interest may be deductible under IRS Publication 936 if you itemize. The calculator shows pre-tax interest savings only. After-tax savings depend on your marginal tax bracket, whether you itemize, your filing status, and how cash-out proceeds (if any) were used. A CPA or tax software run is the right way to get this right.
Ignores PMI removal benefits. If your refinance crosses the 80% LTV threshold (either because the home appreciated or because you paid down principal), the new loan will not carry PMI even if the old one did. That savings — typically $100 to $300/month — is not modeled in the calculator's P&I-only comparison. Add it manually to the monthly savings line if it applies.
Ignores rate-lock and float-down risk. The new rate you enter is presumably a locked rate quote. If you have not locked, market movements between application and closing can change the actual closing rate by 0.125% to 0.50% in either direction. Run the calculator at the high end of the lender's quote range before committing.
For balances above $500,000, for any cash-out scenario, or for any refinance where you are simultaneously changing rate, term, and loan type, this calculator's output should be treated as a first-pass screen. Engage a mortgage broker, CFP, or housing counselor (HUD-approved counseling is free and listed at hud.gov) before signing closing documents.