Refinance Calculator
Model monthly savings, total interest under both loans, and the exact break-even month for any refinance scenario before committing to closing costs.
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Enter your values above to see the results.
Tips & Notes
- ✓Calculate break-even before refinancing — divide total closing costs by monthly savings to find the exact months needed to recover the upfront cost.
- ✓Refinancing into the same remaining term prevents extending your payoff date and almost always saves more total interest than a term extension.
- ✓No-closing-cost refinances charge a higher rate to cover fees — run the break-even on the rate premium over your expected hold period before deciding.
- ✓Rolling closing costs into the loan means paying interest on them — a $5,000 cost financed at 6.5% over 25 years costs roughly $9,800 total.
- ✓Refinancing out of FHA into conventional once you have 20% equity eliminates permanent MIP — this savings often exceeds any rate-based benefit.
- ✓Get multiple Loan Estimates — by law lenders must provide this within 3 business days of application, and origination fees vary widely across lenders.
Common Mistakes
- ✗Comparing only monthly payments when evaluating a refinance — a lower payment with a longer term often costs significantly more in total interest.
- ✗Not including all closing costs in the break-even calculation — origination, title, appraisal, and prepaids add up to 2-3% of the loan amount.
- ✗Assuming a lower rate always saves money — refinancing a 20-year-old loan into a new 30-year at a lower rate frequently increases total interest substantially.
- ✗Refinancing repeatedly without tracking cumulative closing costs — serial refinancers often pay $20,000-$40,000 in fees while the balance barely changes.
- ✗Not checking for prepayment penalties on the current loan — some portfolio loans charge fees for early payoff that eliminate all refinance savings.
- ✗Waiting for rates to fall further without calculating the cost of waiting — every month at a higher rate has a real dollar cost that delays in refinancing incur.
Refinance Calculator Overview
Refinancing saves money only if you stay long enough to recover the closing costs through monthly savings. A lower rate is only half the equation — resetting your loan term can increase total interest even when the payment drops.
This calculator shows the break-even timeline and complete interest comparison so you can make an informed decision.
What each field means:
- Current Balance — your remaining mortgage principal today
- Interest Rate — the new rate you are being offered on the refinance
- Loan Term — the term of the new loan; choosing a new 30-year on an old loan extends your payoff date
- Down Payment — not applicable for refinance; focus on balance, rate, and term comparison
What your results mean:
- Monthly Payment — your new payment after refinancing
- Total Paid — all payments over the full new term
- Total Interest — interest on the new loan only; compare against remaining interest on current loan
- Break-even point — months until cumulative savings exceed closing costs
Example — $220,000 remaining at 7.5%, refinancing to 6.25%:
Current payment: $1,733 (22 years remaining) New 30-year payment at 6.25%: $1,354 Monthly savings: $379 Closing costs: $5,500 Break-even: $5,500 / $379 = 14.5 months Current remaining interest: ~$237,000 New 30-year interest: ~$267,000 WARNING: Lower payment but MORE total interest — the term extension costs $30,000 extra.
EX: Same term vs new 30-year — $220,000 at 7.5%, refinancing to 6.25% Option A — refinance to 22-year term at 6.25%: New payment: $1,591 | Monthly savings: $142 | Break-even: 39 months Total interest: $200,000 — saves $37,000 vs current loan Option B — refinance to new 30-year at 6.25%: New payment: $1,354 | Monthly savings: $379 | Break-even: 14.5 months Total interest: $267,000 — costs $30,000 MORE despite lower rate and payment Same-term refinance almost always saves more total interest than extending the term.
Break-even months by savings and closing costs:
| Monthly Savings | $4,000 closing | $6,000 closing | $8,000 closing |
|---|---|---|---|
| $100/month | 40 months | 60 months | 80 months |
| $200/month | 20 months | 30 months | 40 months |
| $300/month | 13 months | 20 months | 27 months |
| $400/month | 10 months | 15 months | 20 months |
Rate reduction needed to break even — $250,000 / 25 years remaining:
| Current Rate | Break-even in 2yr | Break-even in 5yr | Break-even in 10yr |
|---|---|---|---|
| 7.5% | Need -1.2% | Need -0.5% | Need -0.25% |
| 7.0% | Need -1.15% | Need -0.47% | Need -0.23% |
| 6.5% | Need -1.10% | Need -0.45% | Need -0.22% |
The old rule of thumb that refinancing makes sense with a 1% rate drop is dangerously oversimplified — it ignores how long you plan to stay, what term you are refinancing into, and how many years remain on your current loan. Refinancing a 7-year-old 30-year mortgage into a new 30-year at a lower rate can increase total interest paid by $50,000+ even as the monthly payment drops. Compare total remaining interest on both loans before making any decision.
Frequently Asked Questions
When three conditions align: the new rate generates monthly savings above the amortized cost of closing, you plan to stay beyond the break-even point, and the new term does not add so many years that total interest increases. The break-even is the foundation: divide total closing costs by monthly savings. If break-even is 24 months and you plan to sell in 18 months, refinancing costs money. If break-even is 18 months and you are staying 10 years, refinancing is clearly worthwhile.
Typically 2-5% of the loan amount in closing costs. On a $300,000 loan, that is $6,000-$15,000. Major components include origination fee (0.5-1% of loan), appraisal ($300-$700), title insurance ($500-$2,000), recording fees, and prepaid items. Some lenders offer no-closing-cost refinances where fees are covered by a higher rate. Always request a Loan Estimate within 3 business days of application — it itemizes all costs and allows comparison across lenders.
The number of months until accumulated monthly savings equal total closing costs. If closing costs are $6,000 and monthly savings are $200, break-even is 30 months. Before that point, refinancing has cost you money. After that point, every month saves $200. A practical rule: the break-even should be at least 2-3 years before any expected sale to provide meaningful buffer against plans changing or life circumstances shifting unexpectedly.
Refinancing to a 15-year term costs more monthly but saves dramatically on total interest. The 30-year refinance produces lower payment and more flexibility but extends the payoff horizon. The key question: can you genuinely afford the 15-year payment with margin for emergencies and retirement saving? If the 15-year payment requires cutting retirement contributions below the employer match or eliminates your emergency fund, it is likely too aggressive. A 20-year term often provides a useful middle ground.
Standard documentation includes: two years of W-2s or tax returns for self-employed borrowers, recent pay stubs covering 30 days, two months of bank statements, current mortgage statement, homeowners insurance declaration page, and government ID. FHA and VA streamline refinances require significantly less documentation — typically no income verification or appraisal — because the existing loan history substitutes for underwriting. The lender will pull your credit report and typically order an appraisal, though some streamline refinances waive the appraisal.
Rarely. In the final years of a mortgage, almost all of your payment goes to principal — interest savings from a lower rate are minimal because the interest itself is minimal. On a $300,000 loan with 5 years remaining, total remaining interest might be $15,000-$20,000. Even eliminating 20% through a rate reduction saves only $3,000-$4,000 — less than most closing costs. Continuing to pay the existing loan typically produces better outcomes than incurring closing costs with limited years to recover them.