Mortgage Refinance Calculator
This refinance calculator shows whether refinancing your mortgage pays off. Enter your current loan and a new rate to see your new monthly payment, your monthly savings, and the break-even point, which is the number of months the savings need to cover your closing costs.
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.
- •Refinancing usually makes sense if you stay in the home well past the break-even point.
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 your monthly savings and break-even point.
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 amortization formula, where r is the monthly rate and n is the number of months. The break-even point divides your closing costs by the monthly savings to show how long the new loan takes to pay for itself.
Calculation note: values are processed in the order shown above, using the current input units.
Worked Examples
Lower rate, same term
Small rate drop
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.
Is Refinancing My Mortgage Worth It?
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. Refinancing a loan with 22 years left into a fresh 30-year loan can lower the monthly payment while raising the total interest you pay. The lifetime savings figure below nets out closing costs and accounts for the new term, so you can see the long-run picture, not just the monthly change.
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