Mortgage Refinance Calculator
See whether refinancing your mortgage will save you money — calculates new monthly payment, lifetime savings and how long until closing costs pay back.
Written by Rahman · Last reviewed
Quick answer
Refinancing a $300,000 balance from 7.5% to 6.25%, with 25 years left on both and $4,000 in closing costs, cuts the payment from $2,216.97 to $1,979.01 — a saving of $237.97 a month that repays the closing costs in about 17 months. Past that point it is roughly $67,390 better across the full term. The break-even month is the number that decides it: if you expect to move before it arrives, a lower rate still loses money, and restarting a fresh 30-year term can raise total interest even when the rate falls.
- Principal250,000.00 (48.4%)
- Interest (new loan)261,010.10 (50.6%)
- Closing costs5,000.00 (1.0%)
- Total516,010.10
The verdict discounts both payment streams back to today at your current rate, then compares them. That matters because raw dollar totals are misleading whenever the terms differ — as they do here, 25 years remaining against a new 30-year loan. A longer new term almost always pays more dollars in total while still being the cheaper deal in present-value terms, which is why both figures are shown. The break-even time matters too: if you sell before recouping closing costs, the savings never arrive.
Results are estimates for general guidance and are not financial, tax or legal advice. Except where a calculator names a currency, figures carry no currency of their own — put in pounds and you get pounds back, put in rupees and you get rupees. Figures depend on the assumptions you enter and on rates that change over time — check current rates and speak to a qualified adviser before acting on them.
About the Mortgage Refinance Calculator
Refinancing replaces your existing mortgage with a new one — usually to capture a lower interest rate, shorten or extend the term, or pull cash out of home equity. The decision is more nuanced than just "is the new rate lower?" — closing costs, the time you plan to stay in the home, and the new term length all matter.
This calculator compares your current loan against a hypothetical new loan, accounting for closing costs. It shows you the lifetime savings, the new monthly payment, and the all-important break-even point — how long until your monthly savings have paid back the closing costs.
lifetime_savings = (old_payment × months_remaining) − (new_payment × new_months + closing_costs)
If the result is positive, refinancing wins over the new loan term. The break-even period = closing_costs ÷ (old_payment − new_payment).
You owe $250,000 at 7.0% with 25 years remaining (payment ≈ $1,767/mo). You can refinance into a 30-year at 5.5% (payment ≈ $1,419/mo) with $5,000 closing costs. Monthly savings: $347. Break-even on closing costs: ~14 months. Over the new 30-year term, total cost is $511,000 + $5,000 closing = $516,000 vs $530,000 left on the original — saving about $14,000 lifetime. Worth doing if you'll stay in the home more than 2 years; not worth it if you'll sell within 14 months.
A lower rate can still cost you more interest
The comparison most refinance decisions get wrong is monthly payment against monthly payment. A refinance almost always lowers the payment, because it usually restarts the term — and spreading a smaller balance over a fresh 30 years would lower the payment even at the same interest rate.
Take a $320,000 loan at 6.75% over 30 years, paying about $2,076 a month. Eight years in, the balance is roughly $285,100 and there is around $262,900 of interest still to come over the remaining 22 years. Refinancing that balance to 5.75% over a new 30-year term drops the payment to about $1,664 — a saving of $412 a month — but the total interest over that new term comes to roughly $313,800. The rate fell by a full percentage point and the lifetime interest bill rose by about $51,000.
- The saving is real month to month. It is funded by pushing 96 extra payments onto the end of the loan.
- Refinancing the same balance at 5.75% over 22 years instead — matching the time left on the original — costs about $1,905 a month and roughly $217,900 in interest, which is around $45,000 less than staying put.
- Keeping the term short is what captures the rate improvement. Resetting the term converts it into cash flow instead.
Neither option is wrong. Lower payments matter if cash flow is tight, and there is a legitimate case for taking the 30-year and investing the difference. What is wrong is believing the lower rate alone made the loan cheaper.
Break-even is a date, not a number
Refinancing has upfront costs — origination, appraisal, title, recording — commonly 2% to 5% of the loan amount in the US. The break-even point is simply how long the monthly saving takes to repay them, and it is the single figure that decides whether a refinance makes sense for your situation.
On the example above, $5,000 of closing costs against a $412 monthly saving breaks even in about 12 months. Anyone staying in the home beyond that is ahead on cash flow; anyone selling or refinancing again before it has paid to borrow money they did not keep long enough to benefit from.
- Costs rolled into the loan rather than paid upfront still count — they now accrue interest for the life of the loan.
- A no-cost refinance is not free. The costs are recovered through a higher rate, which pushes out the point at which it pays.
- Cash-out refinancing changes the calculation entirely, because the new balance exceeds the old one. The comparison is then against the cost of borrowing that cash another way, not against the old mortgage.
Frequently Asked Questions
When does refinancing make sense?
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Roughly when (a) the new rate is at least 0.75-1% lower than your current rate, (b) you plan to stay in the home long enough to break even on closing costs, and (c) the new term doesn't add more interest cost than the rate drop saves.
Should I extend the term back to 30 years?
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Extending lowers the monthly payment but adds interest over time. If your priority is cash flow, extend. If it's lifetime cost, keep the term equal or shorter than the years remaining on your current loan.
What are typical closing costs?
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In the US, refinance closing costs typically run 2-5% of the loan amount — lender origination, appraisal, title insurance, recording. Some "no-closing-cost" refinances roll the fees into the loan principal or use a slightly higher rate to cover them.
Does my credit score matter for refinancing?
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Yes — refinancing is a fresh underwriting. The same FICO bands that govern new mortgages apply: 740+ for the best rates, 680-720 for decent, below 660 typically not worth refinancing.
What is cash-out refinancing?
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A cash-out refi means borrowing more than your remaining balance and taking the difference in cash. Useful for funding renovations or paying off higher-interest debt, but it adds to your loan and may bump you to a higher rate tier.
Sources
- CFPB — Understand your Loan Estimate — Line-by-line guide to the closing costs a refinance has to earn back.