Mortgage Refinance Calculator
Determine whether refinancing your mortgage makes financial sense. Enter your current loan details and the terms of a new loan to see how much you could save each month, when you will break even on closing costs, and your total interest savings over the life of the loan.
Refinancing replaces your current mortgage with a new one, ideally at a lower interest rate. The math sounds simple — lower rate, lower payment — but the decision is rarely as clear-cut as it looks. Refinancing has real upfront costs (typically 2–5% of the loan amount), and choosing a new 30-year term effectively resets the amortization clock, which can mean paying more total interest even at a lower rate.
This calculator computes the new monthly payment, the dollar savings per month, the break-even month (when accumulated savings exceed closing costs), and lifetime interest savings. It also handles cash-out refinances, where you borrow more than your current balance and pocket the difference.
The rule of thumb most loan officers quote is "refinance if you can drop the rate by 0.5–1.0 percentage points and stay in the home past break-even." That's a reasonable starting point but it ignores tenure (how long you'll keep the new loan) and term length (a 30-year refi from a 25-year remaining loan adds five years of payments). Run the numbers both ways before deciding.
Inputs
Extra cash borrowed on top of your current balance
Results
Monthly Savings
$315.80
New Monthly Payment
$1,663.18
Break-Even
16 months
Lifetime Savings
$-5,051.23
Total Interest Comparison
Cumulative Savings Over Time
Yearly Comparison
| Year | Current Balance | New Balance | Cumulative Savings |
|---|---|---|---|
| 1 | $275,716.52 | $281,333.69 | $-1,210.41 |
| 2 | $271,123.39 | $277,450.91 | $2,579.18 |
| 3 | $266,198.22 | $273,338.90 | $6,368.77 |
| 4 | $260,917.01 | $268,984.12 | $10,158.36 |
| 5 | $255,254.03 | $264,372.23 | $13,947.95 |
| 6 | $249,181.66 | $259,488.06 | $17,737.54 |
| 7 | $242,670.32 | $254,315.52 | $21,527.13 |
| 8 | $235,688.28 | $248,837.60 | $25,316.71 |
| 9 | $228,201.50 | $243,036.27 | $29,106.30 |
| 10 | $220,173.51 | $236,892.42 | $32,895.89 |
| 11 | $211,565.17 | $230,385.85 | $36,685.48 |
| 12 | $202,334.53 | $223,495.12 | $40,475.07 |
Formula
How to use this calculator
- Enter your current loan balance (not the original loan amount — the remaining balance from your most recent mortgage statement).
- Enter your current interest rate. Look at your note rate, not the APR.
- Enter the years remaining on the current loan. For a loan you originated 5 years ago at 30 years, this is 25.
- Enter the new rate you have been quoted. Get rates from at least 3 lenders — the Federal Reserve consistently finds that shopping saves borrowers thousands.
- Choose the new loan term. Matching your current remaining term (e.g., 25-year refi instead of 30-year) reduces lifetime interest but bumps the monthly payment up.
- Enter expected closing costs. Typical range is 2–5% of the loan amount. Some lenders offer "no-cost" refinances by raising the rate or rolling fees into the principal — neither is truly free.
- If you're doing a cash-out refinance, enter the extra cash you want to borrow on top of the current balance. Most lenders cap cash-out at 80% of home value.
- Review break-even and lifetime savings. If you plan to sell or refinance again before break-even, the refi loses money on net.
Worked examples
Rate drop of 1.25 points
Balance: $280,000, 25 years left at 7.0% Refi to 5.75% for 25 years, $5,000 closing costs Old payment: ≈ $1,979/mo New payment: ≈ $1,762/mo Savings: ≈ $217/mo Break-even: ≈ 23 months Lifetime interest saved: ≈ $65,000 Worth it if you plan to stay in the home for 3+ more years.
The 30-year reset trap
Same loan, but refi into a new 30-year instead of matching the 25. Old payment: ≈ $1,979/mo New payment: ≈ $1,634/mo (looks great!) Savings: ≈ $345/mo Break-even: ≈ 15 months But — lifetime interest on the new loan: $308,000 Remaining interest on the old loan: $314,000 Lifetime interest "saved": only $6,000 The lower monthly payment came from stretching the term, not from the rate cut. To capture the rate cut's real value, take the monthly savings and pay it into principal each month, or match the current term length.
Cash-out for home improvement
Balance $200,000 at 6.5%, refi to 5.75% with $40,000 cash out for a renovation. New balance $240,000 over 30 years, $6,000 closing costs. Old payment: ≈ $1,353/mo New payment: ≈ $1,401/mo Monthly change: +$48 (you pay slightly more, but you got $40K cash) Effective borrowing rate for the $40K: ≈ 6.2% APR after closing costs. Compare to a HELOC or personal loan; if those are higher, the cash-out refi wins.
When to use this calculator
Use this calculator any time mortgage rates drop meaningfully below where you originated. The historical reference point is "0.75–1.0% drop and 3+ years remaining tenure" — but if rates fall further or your closing costs are unusually low, smaller spreads can pencil out.
Also use it when: - Switching from an ARM to a fixed rate before the adjustment period kicks in - Removing PMI after gaining enough equity (refinancing to a conventional loan below 80% LTV) - Pulling cash out at mortgage rates rather than higher unsecured rates - Shortening the term to pay off the house faster while rates are favorable
Don't refinance just because the rate is lower. The tenure question (how long will you stay?) determines whether closing costs ever pay back. If you might sell within 2–3 years, the refi often loses money on net.
Common mistakes to avoid
- Comparing just the monthly payments instead of break-even and lifetime cost. A "lower payment" can be smoke and mirrors from a longer term.
- Stretching back to a 30-year loan when you only had 20 left. Unless you immediately recommit the savings to extra principal, you'll pay more interest than you would have on the old loan.
- Ignoring closing costs by accepting a "no-cost" refi without checking the rate premium. The lender always recovers the costs somewhere.
- Refinancing right before selling. Closing costs are sunk; you'll never recoup them.
- Cashing out for discretionary spending. The cash is mortgaged debt — secured against your home and amortized over 30 years.
- Forgetting that resetting the amortization shifts early payments back toward interest. After 5 years on the old loan, a meaningful share of each payment was finally principal; a new loan goes back to mostly-interest.
Frequently Asked Questions
Sources & further reading
- When (and why) you should refinance — U.S. Consumer Financial Protection Bureau
- Mortgage refinance: cost-benefit analysis — Federal Reserve