Refinance Calculator

Follow these steps to use the refinance calculator:

1. Enter Your Current Loan Balance — This is the amount you still owe on your mortgage, NOT the original purchase price or down payment. If you have an amortization statement from your lender, the balance is listed there. For example, if you took out a $350,000 mortgage 5 years ago and have paid it down, you might now owe $300,000.
2. Enter Your Current Interest Rate — Your current mortgage rate (the annual percentage rate or APR). This is found on your mortgage statement or you can call your lender. Use increments of 0.125% for accuracy, as that is how lenders typically price rates.
3. Enter the Remaining Years on Your Current Mortgage — If you took out a 30-year mortgage 5 years ago, you have 25 years remaining. This affects your current monthly payment calculation.
4. Enter the New Interest Rate (Refinance Offer) — This is the rate your refinance lender has quoted you. Shop with multiple lenders to get the best offer. The calculator compares this new rate against your current rate.
5. Set Your New Loan Term — Use the slider to choose your new mortgage term (10-30 years). Many people refinance to a shorter term (15 years) to pay off their home faster. Others extend to 30 years to lower the monthly payment. Choose based on your financial goals.
6. Enter Your Refinance Closing Costs — Get a Loan Estimate from your lender showing exact closing costs. The default is $5,000, which is typical, but costs vary. Typical range: $2,000–$6,000 depending on loan amount and lender.

Click calculate to see your results. Review the seven key metrics to assess whether refinancing makes sense for your situation. Pay special attention to the break-even point — if it is short (under 3 years), refinancing is likely a smart move. If it is very long (over 7-10 years), you need to be confident you will stay in your home that long.

A mortgage refinance is the process of replacing your existing mortgage with a new loan, typically to secure a lower interest rate, change your loan term, or access your home's equity. Refinancing became a major financial strategy during periods of falling interest rates, such as 2020-2021 when rates dropped below 3%, prompting millions of homeowners to refinance and save tens of thousands of dollars in interest.

There are two primary types of refinances. A rate-and-term refinance is the most common: you refinance for the same loan amount at a new rate and possibly a different term (15-year, 30-year, etc.). This is purely about interest savings and potentially shortening your payoff timeline. A cash-out refinance allows you to borrow against your home equity; for example, if your home is worth $500,000 and you owe $300,000, you could refinance for $350,000, pay off your current mortgage, and pocket $50,000 in cash. Cash-out refinances typically come with higher rates because of the added risk to the lender.

The refinance decision hinges on one core principle: Does the benefit (lower payments, faster payoff, or cash received) outweigh the upfront cost (closing costs, typically $2,000-$6,000)? This is where the break-even point becomes critical. If you save $200 per month but pay $5,000 to refinance, you need to stay in the home for at least 25 months to break even. Homeowners who stay longer gain substantial savings; those who move or refinance again within that window lose money on the deal.

As of early 2026, refinance activity remains relatively low because rates are higher than the historic lows of 2021. However, even small rate reductions—such as from 6.5% to 6.0%—can save thousands of dollars over the life of a loan. A homeowner with a $300,000 balance, 25 years remaining, and dropping rates by 0.5% could save roughly $30,000 over the remaining mortgage term.

The refinance calculator uses three primary formulas to determine whether to refinance:

1. Monthly Payment Formula (Amortization)

M = P × [r(1 + r)n] / [(1 + r)n − 1]

Both your current and new monthly payments use this formula. The difference between the two is your monthly savings.

2. Break-Even Formula

Break-Even Months = Closing Costs / Monthly Savings

This tells you how many months of savings are needed to recover your closing costs. For example: $5,000 closing costs ÷ $200 monthly savings = 25 months to break even. After month 25, you profit from the refinance.

3. Total Cost Formulas

Current Mortgage Total Cost = Current Monthly Payment × Remaining Months

Refinanced Mortgage Total Cost = New Monthly Payment × New Loan Term Months + Closing Costs

Lifetime Savings = Current Total Cost − Refinanced Total Cost

Lifetime savings show the total amount saved if you keep the refinanced mortgage to completion. A negative value means the refinance costs more overall (common if you extend the term significantly or the rate doesn't drop much).

Example 1: Classic Rate-Drop Refinance

Scenario: You have a $300,000 loan balance remaining with 25 years left at 6.5%. A lender offers to refinance at 5.0% for 30 years with $6,000 in closing costs.

• Current Monthly Payment: Using the amortization formula on $300,000 at 6.5% for 25 years (300 months): M = 300,000 × [0.005417 × (1.005417)³⁰⁰] / [(1.005417)³⁰⁰ − 1] = $1,932.74
• New Monthly Payment: For $300,000 at 5.0% for 30 years (360 months): M = 300,000 × [0.004167 × (1.004167)³⁶⁰] / [(1.004167)³⁶⁰ − 1] = $1,610.46
• Monthly Savings: $1,932.74 − $1,610.46 = $322.28 per month
• Break-Even Point: $6,000 ÷ $322.28 = 18.6 months (less than 2 years)
• Lifetime Savings: Current total cost = $1,932.74 × 300 = $579,822. Refinanced total = ($1,610.46 × 360) + $6,000 = $585,766. In this case, extending from 25 to 30 years slightly increases total cost, but the monthly cash flow improvement and break-even under 2 years make it worth considering if you value the flexibility.

Example 2: Aggressive Payoff Refinance (Rate-and-Term to 15 Years)

Scenario: You have $250,000 remaining with 20 years left at 6.0%. A lender offers 4.5% for 15 years with $5,000 closing costs. You want to pay off your home faster.

• Current Monthly Payment: $250,000 at 6.0% for 20 years: M ≈ $1,909.66
• New Monthly Payment: $250,000 at 4.5% for 15 years: M ≈ $1,847.21
• Monthly Savings: $1,909.66 − $1,847.21 = $62.45 per month (small, but you pay off the home 5 years earlier)
• Break-Even Point: $5,000 ÷ $62.45 ≈ 80 months (6.7 years)
• Lifetime Savings: Paying off 5 years early and at a lower rate creates significant savings—you eliminate 60 months of payments at the old rate. This strategy makes sense for disciplined borrowers committed to building home equity faster.

Example 3: Break-Even Analysis – When NOT to Refinance

Scenario: You have $200,000 remaining with 10 years (120 months) left at 6.0%. A lender offers 5.75% for 30 years with $4,000 closing costs. The rate drop is tiny (0.25%).

• Current Monthly Payment: $200,000 at 6.0% for 10 years: M ≈ $2,220.41
• New Monthly Payment: $200,000 at 5.75% for 30 years: M ≈ $1,170.46
• Monthly Savings: $2,220.41 − $1,170.46 = $1,049.95 per month (large, BUT you extend the loan by 20 years)
• Break-Even Point: $4,000 ÷ $1,049.95 ≈ 3.8 months
• The Catch: While you break even quickly and cut your payment in half, you are adding 20 years of payments. Your current mortgage ends in 10 years (age 65 if you are 55 today). The refinance extends it to 40 years. Total paid on current mortgage: $2,220.41 × 120 = $266,449. Total paid on refinance: ($1,170.46 × 360) + $4,000 = $425,366. Even though you save $1,050/month, you pay an extra $159,000 in total interest because you extended the term. Unless you genuinely need the lower payment to survive month-to-month, extending your payoff timeline this far backward usually makes financial sense.