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.
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.
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.
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.
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.
Calculate your monthly mortgage payment including principal, interest, taxes, and insurance.
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Calculate your home equity and how much you could borrow with a HELOC.
Find out how much to save for a home down payment and how long it will take.
Extra cash borrowed on top of your current balance
Monthly Savings
$315.80
New Monthly Payment
$1,663.18
Break-Even
16 months
Lifetime Savings
$-5,051.23
| 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 |