EstimatorMortgage Refinance Calculator
Rates dropped? Compare your current loan against a refinance — monthly savings, how fast closing costs pay for themselves, and total interest over the remaining life.
Current loan
New loan
| Current monthly payment | $0 |
| Monthly savings | $0 |
| Break-even on closing costs | — |
| Interest saved over loan life | $0 |
How it works
Both payments use the amortization formula M = P × r(1+r)n / ((1+r)n − 1). Break-even = closing costs ÷ monthly savings — the point where savings repay the refinance cost. Lifetime interest compares total interest on the current remaining term vs the new term.
Formula & worked example
Formula: Both loans use the standard payment formula M = P × r(1+r)n ÷ ((1+r)n − 1) on today's balance — your current payment is re-amortized over the years you have left. Monthly saving = current payment − new payment, and break-even = closing costs ÷ monthly saving, rounded up.
Worked example: Owe $350,000 at 7.875% with 28 years left (payment $2,584) and refinance to 6.25% for 30 years (payment $2,155): you save $429 a month, so $8,000 of closing costs break even in 19 months — and total interest falls by $92,353 over the two terms.
When to use this
- Rates have dropped and a lender is pitching a refinance — you want the break-even month before the pitch.
- You are deciding between resetting to a fresh 30 years or keeping your remaining term.
- Cash-out temptation needs pricing in total interest, not just the new payment.
- You plan to move in a few years and need to know if the refi pays back before you sell.
How to use it, step by step
- Enter the remaining balance, current rate and years left.
- Enter the new rate and new term being offered.
- Add the closing costs — all of them, in cash terms.
- Read the monthly saving and the break-even month.
- If you will move before break-even, the answer is no — whatever the payment says.
What the inputs mean
| Input | What it is | Typical values |
|---|---|---|
| Remaining balance | What you still owe | From your latest statement |
| Current rate / years left | Your existing loan's terms | Years left, not original term |
| New rate / term | The offer's terms | Compare same-term for a clean read |
| Closing costs | Total cost to do the refi | Typically 2–5% of the balance |
Another worked example
Owing $240,000 at 7.25% with 22 years left (payment $1,821.34), refinancing to 5.75% over the same 22 years gives $1,604.11 — saving $217.23 a month. Against $4,800 of closing costs, break-even is about 22 months: a clear yes if you will stay put three years, a clear no if you are selling next spring.
Frequently asked questions
When does refinancing make sense?
When you'll own the home past the break-even point and the numbers work: lower payment, lower lifetime interest, or both. If you might sell before break-even, the closing costs are money lost.
What is the 1% rule?
An old rule of thumb: refinance when the new rate is at least 1 percentage point below your current rate. With today's closing costs, run the break-even math instead — a 0.5% drop can pay off if costs are low.
Cash-out vs rate-and-term refinance?
Rate-and-term only changes your rate or term; cash-out borrows extra against equity for cash in hand. Cash-out rates run higher and reset your balance upward — use it for value-adding uses, not spending.
Why compare over the same remaining term?
Resetting to a new 30-year term lowers the payment mostly by stretching the debt, not by saving money — lifetime interest often rises. Same-term comparison isolates the rate benefit; if you do reset the clock, this tool's total-interest lines will show the true price.
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