Refinance Calculator
Compare your current mortgage vs. a refinance: payment, savings, and break-even.
Use this Refinance Calculator to compare your existing mortgage with a potential refinance. It estimates the new monthly principal-and-interest payment, monthly savings, closing costs, break-even time, remaining interest, and estimated payoff dates.
Important: A lower monthly payment does not automatically mean refinancing will save money overall. Consider closing costs, the new repayment term, total interest, and how long you expect to keep the loan.
Refinance Calculation Method
For each fixed-rate mortgage, the estimated monthly principal-and-interest payment is calculated using:
M = P × [r(1 + r)n] ÷ [(1 + r)n − 1]
Where:
- M = monthly principal-and-interest payment
- P = loan principal
- r = monthly interest rate
- n = number of monthly payments remaining
Monthly interest rate = annual interest rate ÷ 12 ÷ 100
The calculator compares the current mortgage payment with the estimated payment on the new refinance loan.
Monthly savings = current monthly P&I − new monthly P&I
If closing costs are entered as a percentage:
Estimated closing costs = current loan balance × closing-cost percentage ÷ 100
If you enter a cash-out amount:
New refinance principal = current balance + cash-out amount
Break-Even Time
When refinancing produces positive monthly savings, the simple break-even point is:
Break-even months = closing costs ÷ monthly savings
The break-even point estimates how long the monthly payment savings may take to recover the upfront refinancing costs.
For example, if refinancing costs $5,000 and reduces the monthly principal-and-interest payment by $250:
$5,000 ÷ $250 = 20 months
You would need to keep the refinanced mortgage for approximately 20 months for those payment savings to recover the estimated upfront costs.
Worked Example
Suppose your current mortgage has:
- Remaining balance: $250,000
- Current interest rate: 7%
- Remaining term: 25 years
You are considering refinancing to:
- New interest rate: 6%
- New term: 30 years
- Closing costs: $5,000
- No cash-out
The estimated current principal-and-interest payment is:
≈ $1,766.95 per month
The estimated new payment is:
≈ $1,498.88 per month
Estimated monthly savings:
$1,766.95 − $1,498.88 ≈ $268.07
Estimated break-even time:
$5,000 ÷ $268.07 ≈ 18.7 months
The refinance therefore reaches its simple break-even point after approximately 19 months.
However, the remaining interest on the current 25-year loan is approximately $280,084, while the new 30-year loan would generate approximately $289,595 of interest if kept for the full term.
This example shows why a refinance can reduce the monthly payment without necessarily reducing lifetime interest cost.
Important Notes
- Use the mortgage interest rate rather than APR for the principal-and-interest amortization calculation.
- The simple break-even calculation works only when the refinance produces positive monthly savings.
- Break-even based only on monthly payment savings does not capture every financial effect of refinancing.
- Starting a new, longer loan term may reduce your monthly payment while increasing the number of years you remain in debt.
- Closing costs may include appraisal, origination, underwriting, title, recording, and other charges.
- Some lenders advertise no-closing-cost refinancing by increasing the interest rate or adding costs to the new loan balance.
- Cash-out refinancing increases the new principal and may increase both payment and total interest.
- Property taxes, homeowners insurance, mortgage insurance, HOA dues, escrow adjustments, and other housing expenses are not part of the principal-and-interest comparison.
- Points, lender credits, taxes, prepaids, financed closing costs, and tax consequences are not fully modeled.
- Compare the official Loan Estimates from multiple lenders before deciding whether to refinance.