Mortgage Refinance Calculator
See whether a lower rate actually pays after closing costs, timeline, and remaining loan term.
Current loan vs new loan
Use your current mortgage balance and the new loan offer. Closing costs can be paid upfront or rolled into the loan.
Refinance signalRun the numbers
Compare monthly savings with closing-cost break-even.
Payment comparison
What this meansCheck your break-even
A refinance works best when you stay past the break-even month and the new term does not restart too much interest.
Also compare APR, points, escrow changes, and whether costs are paid upfront or added to the loan.
How a mortgage refinance works
A refinance replaces your current mortgage with a new loan. The main reason people refinance is to lower the interest rate, lower the monthly payment, shorten the term, remove mortgage insurance, or change from an adjustable rate to a fixed rate.
The key is break-even. If closing costs are $6,500 and the refinance saves $250 per month, the simple break-even is 26 months. If you sell or refinance again before then, the lower payment may not have had enough time to repay the costs.
Example: a refinance that pays back
Imagine your current mortgage payment is $2,725 and a new offer would bring it to $2,425, with $6,000 in closing costs. The monthly savings is $300, so the simple break-even is about 20 months. If you expect to stay in the home for seven years, that gives the refinance time to recover the costs and create real cash-flow savings.
The same refinance may look weaker if you expect to move in 12 months. In that case, you might save $3,600 in payments but spend $6,000 to get there. The lower monthly payment feels good, but the timeline does not give it enough room to work.
Monthly savings can be misleading
A new 30-year loan can lower the payment partly because it stretches the debt over more years. That can be helpful for cash flow, but it may increase total interest if you restart the clock. Compare both monthly payment and long-term interest.
Example: lower payment, higher total interest
Suppose you have 22 years left on your mortgage and refinance into a fresh 30-year term. Even with a lower rate, the new loan can add eight extra years of payments. That may be worth it if you need breathing room in the monthly budget, but it is different from a pure interest-saving refinance.
One way to test this is to compare the new payment with a shorter term, such as 20 or 15 years. A shorter refinance may not reduce the monthly payment as much, but it can protect more long-term interest savings.
When refinancing can make sense
- Your break-even month is well before your likely move date.
- The new loan meaningfully lowers the rate after fees and points.
- You can remove mortgage insurance or improve loan terms.
- You want to shorten the loan and can handle the payment.
- You are replacing a risky adjustable payment with a predictable fixed payment.
When to be careful
Be cautious when the refinance only works because the term gets much longer, when closing costs are high, or when you are not sure how long you will keep the home. Rolling costs into the loan can be convenient, but it means you may pay interest on those costs for years.
What to check before refinancing
- APR, points, lender fees, appraisal costs, and title costs.
- Whether closing costs are paid upfront or rolled into the loan.
- How long you realistically expect to stay in the home.
- Whether the refinance removes PMI or changes escrow.
- Whether a shorter term could save interest without straining cash flow.
Questions to ask the lender
- What is the total cash to close, not just the monthly payment?
- Are there points, credits, or prepaid escrow items included in the quote?
- What is the APR compared with the note rate?
- How much principal will be owed after five years under the new loan?
- Is there any prepayment penalty or servicing change to understand?
How it works
The break-even month is simply your closing costs divided by your monthly savings. If refinancing costs $4,000 and lowers your payment by $200 per month, you break even in about 20 months. Before that point you are still recovering the cost of the refinance; after it, the monthly savings are genuinely yours. The key comparison is between the break-even month and how long you realistically expect to keep the loan. If you are likely to sell or refinance again before break-even, the math usually does not favour refinancing, even with a lower rate.
Rate-and-term vs cash-out refinancing
A rate-and-term refinance replaces your existing loan with a new one at a better rate or term without pulling out equity. A cash-out refinance increases the loan balance so you can take equity as cash, which raises the payment and total interest. Cash-out can make sense for high-value uses such as consolidating higher-interest debt, but it converts short-term borrowing into a debt secured by your home and stretched over decades. Treat the two goals separately: first decide whether the rate-and-term move is worth it, then decide whether borrowing more against the home is worth the added long-term cost.
Understanding points and APR
Discount points are prepaid interest: paying points lowers the note rate in exchange for cash upfront. Whether points pay off depends again on how long you keep the loan, because the savings accrue slowly over time. The APR bundles the note rate with certain fees to give a more complete cost picture, which is why comparing APRs across quotes is often more useful than comparing headline rates alone. Two loans with the same note rate can have very different APRs once fees and points are included.
Frequently asked questions
Is it worth refinancing for a small rate drop?
It depends on your loan size and how long you will stay. On a large balance, even a small rate drop can produce meaningful monthly savings and a quick break-even. On a small balance, the same rate drop may not cover closing costs before you move. Always compare the break-even month with your expected time in the home.
Does refinancing reset my loan term?
It can. Refinancing into a fresh 30-year term after several years of payments can lower the monthly payment while adding years of interest. Comparing a shorter new term, such as 15 or 20 years, shows whether you are saving interest or just spreading it out.
Should I roll closing costs into the loan?
Rolling costs in avoids paying cash upfront, but you then pay interest on those costs for the life of the loan and your break-even math changes. If you have the cash and plan to stay a while, paying costs upfront is usually cheaper overall.
What credit and equity do I need?
Requirements vary by lender and loan type, but a stronger credit profile and more home equity generally unlock better rates and lower costs. Get a written Loan Estimate so you can compare the full cost, not just the advertised rate.
Sources and further reading
This calculator uses standard fixed-rate mortgage amortization. It does not include taxes, insurance, PMI, ARM resets, state-specific fees, deductibility, or lender-specific APR disclosures. Use the Loan Estimate from your lender before deciding.