moneyWhat this refinance calculator does
It compares the loan you have with a new fixed-rate loan for the same balance. You get the new monthly payment, how much it changes, the break-even month when monthly savings have repaid your closing costs, and the difference in total interest over both loans’ remaining lives. That last number matters: a lower payment can still cost more overall if the new term is longer.
How to use it
From your latest mortgage statement, enter the remaining principal balance, your current rate and the number of months left. Then enter the rate and term you have been quoted and the total closing costs from the Loan Estimate, including points and lender fees.
Try the new loan both at 30 years and at a term close to what you have left to separate the benefit of the lower rate from the effect of restarting the clock.
Assumptions
- Both loans are fixed-rate with monthly payments, interest rounded to the cent. Payments compared are principal and interest only; taxes, insurance and PMI are assumed unchanged.
- Closing costs are paid in cash at closing. Break-even = closing costs ÷ monthly payment savings, rounded up to a whole month.
- Net savings = remaining payments on the current loan − payments on the new loan − closing costs. Cash-out, rolled-in costs and investment returns are not modeled.
Worked example
A $320,000 balance at 7.25% with 28 years left has a payment of $2,227.70. Refinancing into a 30-year loan at 6.25% with $7,500 of closing costs lowers it to $1,970.30, saving $257.40 a month and breaking even after 30 months; lifetime net savings are $31,707. Choosing a 28-year term at the same rate saves $208.56 a month, breaks even in 36 months and saves $62,581 overall because you don’t add two years of payments.
Frequently asked questions
What is a refinance break-even point?
It is the number of months of lower payments needed to recover the closing costs. If you expect to sell or refinance again before then, the refinance probably won’t pay off.
How much lower does my rate need to be to refinance?
There is no fixed rule. What matters is how quickly savings repay the costs and how long you will keep the loan. Enter your actual quote here; even a smaller rate drop can work if costs are low.
Why can my lifetime interest go up when my payment goes down?
Refinancing into a new 30-year term spreads the balance over more months. You pay less each month but for longer, which can outweigh a lower rate. Compare a shorter new term to see the difference.
Should I include taxes and insurance?
They usually don’t change when you refinance, so this calculator compares principal and interest only. If your escrow or mortgage insurance will change, account for that difference separately.