Refinance Calculator

Say you owe $280,000 on a mortgage at 7.0% with 27 years left, and a lender offers 5.75% on a new 30-year loan with $6,000 in closing costs. Your payment drops from roughly $1,926 to about $1,634 — a saving of around $292 a month. Divide the $6,000 in fees by that $292 and you break even in about 21 months. Stay in the home longer than two years and the refinance pays for itself; sell sooner and it likely doesn't. That single number — the break-even point — is what this refinance calculator is built to find.

The break-even formula

The decision to refinance comes down to one simple ratio:

Each monthly payment itself comes from the standard amortization formula, M = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the balance being refinanced, r is the monthly rate (annual rate ÷ 12), and n is the number of payments. The calculator runs that formula for both your current and new loan, then divides your closing costs by the difference to give the break-even point in months and years.

Monthly savings vs. lifetime interest

A lower monthly payment is not the same as saving money. If you have 27 years left but refinance into a fresh 30-year loan, you re-stretch the balance over a longer schedule. The payment falls, but you may pay more total interest because you're borrowing for longer. That's why this tool shows two distinct numbers: interest saved (before fees) and net savings after closing costs. If the goal is to get out of debt faster, refinancing into a shorter term — like 15 years — often saves the most interest, even if the monthly payment barely moves.

When refinancing makes sense

• You'll stay past break-even: the longer you keep the home beyond the break-even month, the more you save.
• Rates have fallen meaningfully: on a large balance even 0.5%-0.75% can break even quickly; on a small balance you usually need a bigger drop.
• You want a shorter term: moving from 30 to 15 years to slash total interest, if you can handle the higher payment.
• You can drop PMI or switch loan types: e.g. refinancing out of an FHA loan once you have 20% equity.

Watch out for the costs

Closing costs typically run 2%-6% of the loan amount. Some lenders advertise a "no-cost" refinance, but those fees are usually rolled into the balance or paid for with a higher rate, so you still pay — just less visibly. Always request the lender's Loan Estimate, which itemizes every fee, and use the bottom-line cost in this calculator. Also confirm your current mortgage has no prepayment penalty before you refinance.

How to use this refinance calculator

You only need two sets of numbers — your current loan and the offer in front of you. Work through the fields in order:

1. Current balance: enter what you still owe today (your remaining principal), not the original loan amount or the home's value.
2. Current rate: use the interest rate on your existing mortgage so the tool can size your current payment and remaining interest.
3. Years remaining: enter how many years are left on your current loan, not the original term. Many homeowners are several years in, so this is often less than 30.
4. New rate: enter the rate the lender quoted. Try a couple of values to see how sensitive your break-even is to a fraction of a percent.
5. New term: pick 30, 20, or 15 years. A shorter term cuts lifetime interest the most; a longer term lowers the monthly payment but can add interest overall.
6. Closing costs: use the bottom-line total from the lender's Loan Estimate. This is the number divided by your monthly savings to find the break-even point.

The result updates instantly. Read the monthly savings and break-even months first, then check the net savings after closing costs row to confirm the refinance actually wins over your remaining timeline.

Who this calculator is for

This tool is for anyone weighing a new loan against the mortgage they already have. That includes:

• Homeowners chasing a lower rate who want to know whether the savings beat the fees before they apply.
• People who want to shorten their term — for example moving from a 30-year to a 15-year loan to pay off the house sooner.
• Borrowers trying to drop PMI or switch out of an FHA loan now that they have built enough equity.
• Anyone who moved into a high-rate loan a year or two ago and is watching for a chance to refinance.
• Buyers comparing lender offers, who need an apples-to-apples break-even on each Loan Estimate, not just the advertised rate.

A second worked example: refinancing into a shorter term

Suppose you owe $240,000 at 6.75% with 24 years remaining, and your current payment is about $1,685. Instead of resetting to 30 years, you refinance into a 15-year loan at 5.5% with $5,500 in closing costs. The new payment climbs to roughly $1,961 a month — about $276 more — so on a payment basis this looks worse. But look at the interest: over the remaining life of the old loan you'd pay roughly $245,000 in interest, while the 15-year loan costs only about $113,000. That's roughly $132,000 in lifetime interest saved, minus the $5,500 in fees. The lesson: when your goal is to get out of debt rather than free up cash flow, the break-even-on-payment math misses the point — you compare the interest saved row instead.

Key refinance terms explained

• Rate-and-term refinance: replaces your loan with a new one that has a different rate and/or term but the same balance. That's what this calculator models.
• Cash-out refinance: a new, larger loan that pays off the old one and hands you the difference in cash. It raises your balance and payment — use the cash-out refinance calculator for that.
• Closing costs: the fees to set up the new loan — origination, appraisal, title, recording, and any points — usually 2%-6% of the loan.
• Break-even point: the month when your accumulated monthly savings finally equal the closing costs. After it, the lower payment is pure gain.
• Discount points: optional upfront fees (1 point = 1% of the loan) you can pay to buy down the rate. They add to closing costs but lower the payment.
• Loan-to-value (LTV): your balance divided by the home's value. Lenders generally want LTV at or below 80% to skip mortgage insurance on the new loan.

What changes the break-even the most

If you adjust the inputs and watch the break-even move, a few factors dominate:

• Closing costs: the numerator of the break-even ratio — higher fees push the break-even out month for month.
• Rate drop: the bigger the gap between your old and new rate, the larger the monthly savings and the faster you break even.
• Loan balance: on a large balance, even a small rate cut produces big dollar savings; on a small balance you need a bigger drop to make it worthwhile.
• New term: stretching back to 30 years lowers the payment (faster payment break-even) but can add lifetime interest, so the two break-evens can disagree.
• How long you'll stay: not an input but the deciding factor — a 25-month break-even only pays if you keep the loan well past month 25.

How the result is used in real life

The break-even month is the number you weigh against your own plans. If you're confident you'll keep the home and the loan well beyond the break-even point, the refinance puts the monthly savings straight into your budget for the rest of the loan. If a move, a job change, or another refinance is likely before break-even, the math says wait. Lenders and loan officers will often lead with the lower monthly payment because it sounds attractive; this calculator gives you the two numbers they tend to skip — net savings after fees and lifetime interest — so you can judge the deal on its full cost, not just the headline payment.

Limitations and assumptions

This calculator is a planning estimate, not a loan offer. Keep these assumptions in mind:

• It models a rate-and-term refinance only — it doesn't add a cash-out amount to the balance.
• It assumes a fixed rate on the new loan; it doesn't model adjustable-rate (ARM) adjustments.
• It doesn't include changes to escrow, property tax, insurance, or PMI, which can shift your true monthly payment up or down.
• It assumes no prepayment penalty on your current loan — check your existing note before refinancing.
• Your actual rate and fees depend on credit score, equity, loan type, and the lender, so compare several real Loan Estimates.

How it compares to related calculators

This page answers "does refinancing my current loan pay off?" If your question is different, a sister tool fits better:

• To estimate a brand-new purchase payment with taxes and insurance, use the Mortgage Calculator.
• To pull equity out as cash, use the Cash-Out Refinance Calculator, which models a larger balance.
• To see how extra payments — instead of a refinance — shorten your loan, use the Mortgage Payoff Calculator.
• For a full payment-by-payment breakdown of either loan, use the Amortization Calculator.
• To tap equity without replacing your first mortgage, compare a HELOC or a Home Equity Loan instead.
• If you switch to making half-payments every two weeks after refinancing, the Biweekly Mortgage Calculator shows the extra payoff effect.

Types of refinance, and which one this models

"Refinance" is an umbrella term for several different transactions, and the right calculator depends on which one you're doing. This page models the most common case — a rate-and-term refinance — but it helps to know where the others differ so you don't compare apples to oranges:

• Rate-and-term refinance: you replace your existing loan with a new one at a different rate, a different term, or both, while keeping roughly the same balance. The whole point is to lower the rate, shorten the term, or both. This is what the calculator above is built for.
• Cash-out refinance: you take out a new loan that is larger than what you owe and pocket the difference, often for home improvements, debt consolidation, or a big expense. Because the balance and payment rise, the break-even math is different — model it with the cash-out refinance calculator.
• Streamline refinance: FHA and VA loans offer simplified "streamline" programs (FHA Streamline, VA IRRRL) that reduce paperwork and sometimes skip the appraisal. They usually still have closing costs, so the break-even logic on this page still applies — you just enter lower fees.
• No-closing-cost refinance: not a separate product but a pricing choice. The lender either folds the fees into your balance or gives you a higher rate to cover them. Either way you pay; enter the true cost so the break-even is honest.

If your real goal is to pull equity out rather than lower your rate, also weigh a second loan that leaves your first mortgage untouched — a home equity loan or a HELOC — before refinancing the whole balance at today's rate.

When is the right time to refinance?

Timing a refinance is less about catching the absolute bottom of the rate market and more about whether the numbers work for your situation. A few signals suggest it may be worth running the calculator now:

• Rates have dropped since you closed. If market rates are meaningfully below your current rate, the monthly savings can be large enough to clear closing costs quickly — especially on a big balance.
• Your credit has improved. If your score has climbed since you bought, you may now qualify for a better rate tier than the one baked into your original loan, even if market rates are flat.
• You've built equity. Crossing 20% equity can let you drop mortgage insurance, and a lower loan-to-value ratio often unlocks better pricing.
• You want to change your loan structure. Moving from an adjustable-rate mortgage to a fixed rate before the rate resets, or from a 30-year to a 15-year term, can be a reason to refinance even without a dramatic rate drop.
• You'll keep the home long enough. The single biggest timing factor isn't the rate at all — it's whether you'll stay past the break-even month. If a move is on the horizon, even a great rate may not pay off.

The wrong time to refinance is when you're close to the end of your loan (most of your payment is already principal, so there's little interest left to save) or when you're likely to move, sell, or refinance again before you recover the fees.

The refinance process, step by step

Once the calculator tells you a refinance is worth pursuing, the actual process usually runs through these stages:

1. Shop and compare offers. Request quotes from several lenders within a short window. Each will send a Loan Estimate — a standardized form that itemizes the rate, the monthly payment, and every closing cost so you can compare like for like.
2. Apply and lock your rate. Submit a full application with the lender you choose and decide whether to lock the rate. A lock protects your quoted rate for a set number of days while the loan is processed.
3. Appraisal and underwriting. The lender typically orders an appraisal to confirm the home's value and verifies your income, assets, and credit. This is where your loan-to-value ratio and equity are confirmed.
4. Closing Disclosure and review. At least three business days before closing you receive a Closing Disclosure, which finalizes the numbers. Compare it line by line against the original Loan Estimate to catch any fee creep.
5. Close and fund. You sign the new loan, which pays off the old one. On a primary residence there's usually a three-day right to cancel (rescission) after signing before the loan funds.

Start to finish, a refinance commonly takes a few weeks to a couple of months. Plan for one more mortgage payment on the old loan while the new one is processed.

What lenders look at when you refinance

Your quoted rate — the single number that drives the savings in this calculator — is set by your lender based on a handful of factors. Understanding them helps you predict whether the rate you plug in is realistic:

• Credit score: the higher your score, the lower your rate. The best advertised rates usually go to borrowers in the 740+ range, and pricing steps down in tiers below that.
• Loan-to-value ratio: the less you owe relative to the home's value, the lower the risk to the lender and the better your rate. Below 80% LTV you also avoid mortgage insurance on the new loan.
• Debt-to-income ratio: lenders check that your total monthly debts, including the new payment, stay within their limits relative to your income.
• Loan type and term: conventional, FHA, VA, and jumbo loans price differently, and shorter terms (like 15 years) usually carry lower rates than 30-year loans.
• Property and occupancy: a primary residence typically gets better pricing than a second home or an investment property.

Because of all this, the "advertised" rate you see online is a best-case figure. Get a personalized Loan Estimate, then put that real rate into the calculator above for an honest break-even.

Documents you'll need to refinance

Gathering paperwork before you apply speeds up underwriting and reduces surprises. Lenders typically ask for:

• Recent pay stubs and W-2s or, if you're self-employed, a couple of years of tax returns and profit-and-loss statements.
• Recent bank and investment statements to verify your assets and reserves.
• Your current mortgage statement, showing the balance, rate, and servicer.
• Proof of homeowners insurance and, where applicable, recent property tax bills.
• A government-issued ID and authorization for a credit check.

Alternatives to refinancing

Refinancing isn't the only way to lower your interest cost or your payment, and sometimes a cheaper move makes more sense, especially if your break-even is far out:

• Make extra principal payments. If your only goal is to pay less interest, adding to your monthly payment cuts the balance and shortens the loan without any closing costs. The mortgage payoff calculator shows the effect.
• Recast your mortgage. Some lenders let you make a large lump-sum payment and then re-amortize the remaining balance, lowering the monthly payment while keeping your existing rate. It usually costs a small fee instead of full closing costs.
• Request PMI removal. If you've reached 20% equity, asking your servicer to cancel mortgage insurance can lower your payment without refinancing at all.
• Borrow against equity separately. If you need cash but like your current low rate, a HELOC or home equity loan leaves your first mortgage in place rather than refinancing the whole balance at today's rate.

Run the break-even on this page first; if it's far in the future, one of these no-refinance moves may get you a better result for less.

Sources

• Consumer Financial Protection Bureau (CFPB) — Owning a Home: refinancing, the Loan Estimate, and closing costs.
• Consumer Financial Protection Bureau (CFPB) — What is private mortgage insurance (PMI)?
• U.S. Department of Housing and Urban Development (HUD) — Buying a Home and FHA refinance programs.