Mortgage Refinance Calculator
A $200,000 balance refinanced from 6% to 4% over the same 30-year term reduces modeled principal-and-interest payment by $244.27 per month. With $6,000 paid upfront in closing costs, break-even is 25 months. This mortgage refinance calculator compares payments, remaining interest, monthly savings, and a closing-cost break-even estimate. It sizes both loans to the current balance and treats closing costs as cash paid upfront. The output does not include taxes, insurance, mortgage insurance, escrow, fees added to principal, or changes in loan features. A lower payment can also come from resetting the term, which may increase total interest even when the rate falls.
Quick answer
A lower rate reduces your monthly payment, but closing costs come first.
What this tells you
- •A lower rate reduces your monthly payment, but closing costs come first.
- •The break-even point is how long it takes the monthly savings to repay those costs.
- •Passing break-even is one consideration, but total interest, term reset, cash needs, risk, and future plans also matter.
- •Payments cover principal and interest only and use the same remaining balance for both loan calculations.
- •Positive monthly savings divide upfront costs, and break-even rounds up to the next whole month.
- •If monthly savings are zero or negative, break-even displays N/A even if another refinance goal might exist.
How to Use
- 1Enter your current loan balance and interest rate.
- 2Enter the years remaining on your current mortgage.
- 3Enter the new interest rate and the new loan term.
- 4Add your estimated closing costs for the refinance.
- 5Calculate to see both principal-and-interest payments, monthly savings, whole-month break-even, and modeled lifetime savings.
- 6Check whether the new term differs from the remaining term. A longer term can lower payment while extending debt and raising total interest.
- 7Replace estimates with the lender's Loan Estimate and confirm points, credits, prepaid items, escrow, cash to close, and any balance financed.
How It Works
Formula
New Payment = Balance x [r(1+r)^n] / [(1+r)^n - 1]
Monthly Savings = Current Payment - New Payment
Break-Even (months) = Closing Costs / Monthly SavingsBoth payments use the standard fixed-rate amortization formula, where monthly rate is annual percentage rate divided by 12 and months are rounded from years times 12. A 0% rate uses principal divided by months. Monthly savings equals current payment minus new payment. If savings are positive, break-even is closing costs divided by savings and rounded up to a whole month. If savings are zero or negative, the calculator reports N/A. Lifetime savings equals current remaining interest minus new total interest minus upfront closing costs. Costs are not added to the new principal, and the calculation does not discount future payments to present value.
Calculation note: values are processed in the order shown above, using the current input units.
Worked Examples
Lower rate, same term
Small rate drop
Same 30-year term with a two-point rate drop
Dividing $6,000 by unrounded monthly savings gives about 24.56 months, so the calculator rounds up to 25. Modeled lifetime savings are $81,937.37 after costs.
Higher payment and no break-even
The new modeled payment is higher than the current payment. Since monthly savings are negative, closing costs cannot be recovered through payment savings in this branch.
Zero-interest new loan branch
At 0%, the new payment is $120,000 divided by 120 months. Positive monthly savings and zero closing costs produce a break-even of 0 months.
When Refinancing Usually Makes Sense
A quick guide to reading your break-even point against how long you plan to stay.
| Break-Even Point | Plan to Stay | Worth It? |
|---|---|---|
| 18 months | 5+ years | Yes, savings far outlast the costs |
| 36 months | 5+ years | Usually yes |
| 60 months | 4 years | Probably not, you move before breaking even |
| No savings | Any | No, the new payment is higher |
Break-even is the number to watch. If you sell or refinance again before that point, the closing costs outweigh the savings.
How to read a refinance comparison
Refinancing replaces your current mortgage with a new one, usually to get a lower rate or change the term. The catch is closing costs, which often run 2% to 5% of the loan amount. The break-even point tells you how many months of lower payments it takes to earn those costs back. Refinancing tends to be worth it when you plan to keep the home well past that point.
Watch the loan term too. Replacing 22 remaining years with a new 30-year loan can reduce payment because repayment is stretched across more months. The lifetime-savings output compares modeled interest over each full term and subtracts upfront closing costs. A negative value means the new loan costs more under those assumptions.
Break-even does not measure every cost or benefit. It ignores the time value of money, tax treatment, changes in insurance or escrow, opportunity cost of cash paid at closing, and future refinancing or early payoff. The lender's disclosures and an amortization comparison provide the transaction-specific figures.
Rate quotes depend on credit, loan-to-value ratio, occupancy, property type, points, market conditions, and lock terms. A quoted note rate may come with costs or credits that change the comparison. Compare annual percentage rate, cash to close, and loan features along with payment.
Common mistakes
- Looking only at the lower monthly payment and ignoring closing costs
- Resetting to a longer term, which can raise total interest paid
- Refinancing shortly before selling, so you never reach break-even
- Forgetting that rolling costs into the loan adds interest to them
- Comparing only note rates without points, lender credits, annual percentage rate, and cash to close
- Assuming taxes, insurance, mortgage insurance, and escrow are part of the displayed payment
- Treating break-even as a guarantee even though selling, prepaying, or refinancing again changes the outcome
- Using a longer new term to claim savings without comparing total interest and payoff date
Limitations
This calculator compares fixed-rate principal-and-interest payments on the same current balance. It rounds years times 12 to whole months and displays money to 2 decimals. Closing costs are treated as upfront cash rather than added to principal. The model does not include points beyond entered costs, lender credits, prepaid interest, escrow funding, property taxes, homeowners insurance, mortgage insurance, association charges, appraisal differences, taxes, deductions, recapture, penalties, adjustable rates, balloon terms, interest-only periods, cash-out proceeds, or time value of money. It does not assess credit, income, debt-to-income ratio, loan-to-value ratio, eligibility, rate-lock risk, property value, or approval. Lifetime savings assume both loans run to their stated ends without sale, prepayment, default, or another refinance.
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