Compare your current mortgage with a potential refinance. Estimate your new monthly payment, monthly savings, break-even period, total interest costs, and potential long-term savings.
A refinance calculator helps estimate whether replacing an existing mortgage with a new loan could reduce monthly payments, lower interest costs, or improve the overall loan structure.
The calculator compares your current mortgage with a proposed refinance and estimates the new monthly payment, monthly payment difference, closing-cost break-even period, remaining interest, and potential lifetime savings.
A refinance calculator compares two loan scenarios: the mortgage you currently have and the new mortgage you are considering.
| Input | What It Represents |
|---|---|
| Remaining Mortgage Balance | The principal still owed on your current mortgage. |
| Current Interest Rate | The annual interest rate on your existing loan. |
| Years Remaining | The number of years left on your current mortgage. |
| New Interest Rate | The proposed annual rate on the refinance loan. |
| New Loan Term | The repayment period for the refinanced mortgage. |
| Closing Costs | Fees and expenses associated with completing the refinance. |
The monthly principal-and-interest payment on a fixed-rate mortgage is generally calculated using the standard amortization formula:
Monthly Payment = P × [r(1 + r)n] ÷ [(1 + r)n - 1]
| Variable | Meaning |
|---|---|
| P | Loan principal. |
| r | Monthly interest rate. |
| n | Total number of monthly payments. |
Suppose a homeowner owes $300,000 on a mortgage with a 6.5% interest rate and 25 years remaining. A refinance is available at 5.5% for another 25-year term with $6,000 in closing costs.
| Item | Current Mortgage | Refinance |
|---|---|---|
| Balance | $300,000 | $300,000 |
| Interest Rate | 6.5% | 5.5% |
| Remaining / New Term | 25 Years | 25 Years |
| Monthly Principal & Interest | About $2,026 | About $1,842 |
| Monthly Difference | About $183 Less Per Month | |
| Closing Costs | — | $6,000 |
| Estimated Break-Even | About 33 Months | |
Under these assumptions, the refinance lowers the monthly principal-and-interest payment. Whether refinancing is worthwhile depends on how long the homeowner keeps the loan and whether the total savings exceed the refinance costs.
The refinance break-even point estimates how long it takes for monthly payment savings to recover the closing costs of refinancing.
A simple break-even formula is:
Break-Even Months = Closing Costs ÷ Monthly Payment Savings
| Example | Amount |
|---|---|
| Closing Costs | $6,000 |
| Monthly Savings | $183 |
| Estimated Break-Even | About 33 Months |
If you expect to sell the home or refinance again before reaching the break-even point, the refinance may not recover its upfront costs through monthly savings alone.
A lower interest rate does not automatically mean refinancing is financially beneficial. Closing costs can offset part of the savings, particularly if you do not keep the new mortgage for long.
| Situation | Potential Interpretation |
|---|---|
| Planning to Stay Beyond Break-Even | The refinance has more time to recover costs and generate savings. |
| Planning to Move Before Break-Even | Closing costs may exceed the payment savings realized. |
| No Monthly Payment Savings | A standard payment-based break-even point may not exist. |
| Very Low Closing Costs | The break-even period may be shorter. |
There is no universal interest-rate reduction that automatically makes refinancing worthwhile. The answer depends on the mortgage balance, remaining term, closing costs, new term, and how long you plan to keep the loan.
Even a relatively small rate reduction can create meaningful savings on a large mortgage balance, while a larger rate reduction may still be unattractive if closing costs are high or the borrower expects to move soon.
The new mortgage term can have as much impact on the result as the interest rate.
| Refinance Choice | Potential Effect |
|---|---|
| Shorter Term | May raise the monthly payment but reduce total interest. |
| Same Remaining Term | Makes the comparison easier because repayment length stays similar. |
| Longer Term | May lower monthly payments but can increase total interest over time. |
A refinance can lower the monthly payment partly because the debt is spread over a longer period. This can create a lower payment even when the long-term interest savings are limited.
For example, refinancing a mortgage with 18 years remaining into a new 30-year loan could reduce the monthly payment substantially, but the borrower may make payments for 12 additional years.
For this reason, monthly payment savings should be evaluated alongside total interest and loan duration.
Mortgage refinancing generally involves transaction costs. The exact fees vary by lender, location, loan type, and property.
| Possible Cost | Description |
|---|---|
| Loan Origination Fee | Fee charged for processing or originating the new mortgage. |
| Appraisal | Cost of estimating the property's current value. |
| Title Services | Fees related to title review, insurance, or settlement. |
| Credit Report | Cost associated with obtaining borrower credit information. |
| Recording Fees | Government fees for recording mortgage documents. |
| Prepaid Items | May include interest, taxes, or insurance collected at closing. |
Some borrowers pay refinance costs in cash, while others add eligible costs to the new loan balance.
| Option | Potential Advantage | Potential Trade-Off |
|---|---|---|
| Pay Upfront | Keeps the new loan balance lower. | Requires more cash at closing. |
| Finance Costs | Reduces immediate cash required. | Increases the loan balance and can add interest expense. |
Financing closing costs does not make them disappear. It generally means borrowing the money and potentially paying interest on those costs over time.
A no-closing-cost refinance generally does not mean the transaction has no costs. Instead, the lender may cover some fees in exchange for a higher interest rate, or the costs may be incorporated into the financing structure.
Comparing the interest rate, monthly payment, loan balance, and total cost can help determine whether this type of refinance is attractive.
Monthly savings and lifetime savings measure different aspects of a refinance.
| Measure | What It Shows |
|---|---|
| Monthly Savings | Difference between the old and new monthly principal-and-interest payments. |
| Interest Savings | Difference between expected remaining interest on the old and new loans. |
| Lifetime Savings | Difference in remaining total loan costs after considering refinance costs. |
| Break-Even Period | Time required for monthly savings to offset closing costs. |
Yes. A refinance does not always reduce the monthly payment.
For example, moving from a 25-year remaining term to a 15-year mortgage can produce a higher monthly payment even if the interest rate falls significantly.
The benefit in that situation may be faster debt repayment and lower total interest rather than immediate monthly cash-flow savings.
A rate-and-term refinance replaces the existing mortgage primarily to change the interest rate, repayment term, or both.
| Possible Goal | Example |
|---|---|
| Lower Interest Rate | Reduce borrowing cost. |
| Lower Monthly Payment | Improve monthly cash flow. |
| Shorter Loan Term | Pay off the mortgage faster. |
| Change Loan Structure | Move between different mortgage types where appropriate. |
A cash-out refinance replaces the existing mortgage with a larger loan and provides part of the difference to the homeowner as cash.
Because this increases the amount borrowed, a cash-out refinance should be evaluated differently from a simple rate-and-term refinance. Monthly payment, interest costs, equity, and the purpose of the borrowed funds all matter.
The calculator on this page is designed primarily for comparing a standard mortgage refinance rather than modeling additional cash taken from home equity.
A cash-in refinance involves paying down part of the mortgage balance at closing before taking out the new loan.
This can reduce the new loan amount and may improve loan-to-value ratios, but it also requires additional cash from the borrower.
Some homeowners refinance from a longer remaining term into a shorter mortgage, such as moving to a 15-year loan.
| Potential Benefit | Potential Trade-Off |
|---|---|
| Faster Payoff | Higher required monthly payment. |
| Lower Total Interest | Less monthly cash-flow flexibility. |
| Faster Equity Growth | More income committed to housing each month. |
Extending the repayment period may lower the monthly payment, but it can increase the number of years during which interest is paid.
A lower payment should therefore not be interpreted automatically as lower total cost.
The remaining balance influences how much a lower rate can save. A rate reduction applied to a large balance generally produces a larger dollar difference than the same rate reduction applied to a small balance.
| Factor | Effect |
|---|---|
| Larger Balance | Interest-rate changes can produce larger dollar savings. |
| Smaller Balance | Closing costs may represent a larger percentage of the loan. |
| Long Remaining Term | More time remains for interest savings to accumulate. |
| Short Remaining Term | There may be less future interest left to eliminate. |
Mortgage rates and loan terms can be influenced by borrower qualifications, including credit history, income, debt obligations, property characteristics, equity, and loan type.
A rate advertised generally may not be the same rate offered to every borrower.
Loan-to-value, or LTV, compares the mortgage amount with the property's value.
The basic formula is:
LTV = Mortgage Balance ÷ Property Value × 100
LTV can influence loan eligibility, pricing, mortgage insurance requirements, and available refinance options.
A refinance can sometimes affect private mortgage insurance requirements because the new loan is evaluated using the property's value and the new mortgage balance.
Whether mortgage insurance applies depends on the loan program, equity, property value, and lender requirements.
| Strategy | Main Purpose |
|---|---|
| Refinancing | Replace the mortgage to change the rate, term, or loan structure. |
| Extra Mortgage Payments | Reduce the existing principal faster without replacing the loan. |
A homeowner with a favorable existing mortgage may prefer making extra principal payments rather than paying closing costs to refinance. Another borrower may save more by refinancing to a substantially lower rate.
A mortgage recast generally involves making a large principal payment and asking the lender to recalculate the monthly payment based on the lower balance while keeping the existing loan rate and remaining term.
| Feature | Refinance | Recast |
|---|---|---|
| New Mortgage | Yes | No |
| Interest Rate Can Change | Yes | Usually No |
| Loan Term Can Change | Yes | Generally existing schedule remains |
| Closing Costs | Can be significant | Often lower, if available |
The break-even period provides one way to evaluate this question. If the refinance takes three years to recover its costs, staying considerably longer than three years gives the monthly savings more time to produce a financial benefit.
However, break-even analysis is only one factor. A shorter loan term, cash-out transaction, changing mortgage insurance, or financing closing costs can make the comparison more complex.
| Situation | Possible Benefit |
|---|---|
| Meaningfully Lower Interest Rate | Can reduce interest expense and potentially the monthly payment. |
| Strong Break-Even Period | Closing costs may be recovered relatively quickly. |
| Planning to Keep the Loan Long-Term | Provides more time to benefit from savings. |
| Need a Shorter Term | Can accelerate mortgage repayment. |
| Improved Borrower Profile | May provide access to more favorable loan terms. |
| Situation | Potential Concern |
|---|---|
| Planning to Move Soon | May not reach the break-even point. |
| High Closing Costs | Can eliminate much of the potential savings. |
| Small Rate Reduction | Savings may not justify the transaction costs. |
| Restarting With a Much Longer Term | Could increase total interest despite a lower monthly payment. |
| Very Small Remaining Balance | Potential interest savings may be limited. |
| Question | Why It Matters |
|---|---|
| What is the new interest rate? | Determines much of the payment and interest savings. |
| What are the total closing costs? | Needed to calculate break-even. |
| Will costs be paid upfront or financed? | Affects both cash required and total borrowing. |
| How long will I keep this mortgage? | Determines whether there is enough time to recover costs. |
| Is the new term longer or shorter? | Can materially change total interest. |
| Are there lender credits? | May reduce upfront costs in exchange for different pricing. |
| Mistake | Potential Impact |
|---|---|
| Looking Only at the Interest Rate | Ignores closing costs and loan term. |
| Focusing Only on Monthly Payment | Can hide a longer repayment period and greater total interest. |
| Ignoring Break-Even | May result in refinancing shortly before moving. |
| Automatically Restarting a 30-Year Term | Can extend debt repayment substantially. |
| Ignoring Financed Closing Costs | Understates the new loan balance and interest expense. |
| Not Comparing Multiple Offers | May result in accepting less favorable loan pricing. |
| Calculator | Main Purpose |
|---|---|
| Refinance Calculator | Compares an existing mortgage with a proposed replacement loan. |
| Mortgage Calculator | Estimates payments for a mortgage balance, rate, and term. |
| Mortgage Payoff Calculator | Estimates how extra payments can accelerate an existing mortgage. |
A refinance calculator compares an existing mortgage with a potential new loan and estimates changes in monthly payment, interest cost, closing-cost break-even time, and total borrowing cost.
A simple break-even estimate divides refinance closing costs by monthly payment savings. For example, $6,000 of costs divided by $200 of monthly savings produces a break-even period of about 30 months.
No. Closing costs, loan term, remaining balance, and how long you keep the new mortgage can all affect whether the refinance produces meaningful savings.
A shorter term can reduce total interest and accelerate payoff, but it usually requires a higher monthly payment. The appropriate choice depends on cash flow and financial goals.
Financing costs can reduce the cash required at closing, but it increases the mortgage balance and may cause you to pay interest on those costs. Compare both options before deciding.
It generally means the borrower does not pay certain closing costs directly at closing. The costs may instead be reflected in a higher interest rate, lender pricing, or the new loan structure.
Yes. Extending the repayment period significantly can cause total interest to increase even when the new interest rate is lower.