Refinance Calculator
Find out if refinancing makes sense and when you will break even.
How refinancing is calculated
A refinance replaces your current mortgage with a new loan. The calculator compares your current monthly payment against the new payment, then estimates how long it takes monthly savings to recover the closing costs.
A lower monthly payment can be useful, but it is not the whole story. Extending the loan term can reduce the payment while increasing the total amount paid over time.
Break-even formula
The break-even point shows how many months you need to keep the new loan before the upfront refinance costs are recovered by monthly savings.
Monthly savings = current monthly payment - new monthly payment
Break-even months = closing costs / monthly savings
Lifetime difference = old remaining payments - new payments - closing costsWorked example: If refinancing saves $250 per month and costs $4,000 to close:
Break-even = $4,000 / $250
Break-even = 16 months
Stay longer than 16 months to begin seeing net savingsCurrent loan vs refinance
| Measure | Current loan | New loan |
|---|---|---|
| Monthly payment | $1,847.48 | $1,498.88 |
| Total remaining payments | $554,243.38 | $543,595.47 |
| Interest rate | 7.5% | 6% |
| Loan term | 25 years | 30 years |
When refinancing may make sense
Costs to compare
| Cost | Typical effect | Why it matters |
|---|---|---|
| Origination fees | Upfront cost | Raises break-even time |
| Appraisal and title | Closing cost | Often required for the new loan |
| Points | Rate tradeoff | Paying points can lower rate but increases upfront cost |
| Escrow and prepaid items | Cash needed | May affect cash to close even when not pure fees |
Practical refinance tips
- Compare APR, not only rate. APR includes more loan costs and can make offers easier to compare.
- Know your stay horizon. If you may move before break-even, upfront costs can outweigh monthly savings.
- Watch the term reset. Restarting a 30-year clock can lower payment while increasing total interest.
- Ask about no-cost options. They may reduce upfront cash, but usually trade that for a higher rate or rolled-in costs.
- Get multiple quotes. Small differences in rate and fees can change the break-even point meaningfully.
Frequently asked questions
When does refinancing a mortgage make sense?
Generally when you can secure a meaningfully lower interest rate, shorten your term affordably, or switch loan types, and you will stay long enough to recoup the closing costs.
What is the break-even point on a refinance?
It is the time it takes for monthly savings to cover the refinancing costs. If you will move before then, refinancing may not pay off.
Does refinancing reset my loan term?
Usually yes — a new loan starts a new term. Refinancing a 30-year loan into another 30-year loan can lower payments but extend how long you pay interest.
What costs are involved in refinancing?
Typical costs include application, appraisal, origination and closing fees, often 2–5% of the loan. Factor these into your break-even calculation.
Refinancing compares your current mortgage with a new loan. Monthly savings = current payment - new payment Break-even = closing costs / monthly savings If you stay in the home longer than the break-even point, the refinance may make sense. Also compare total interest and loan term, not just monthly payment.