Refinancing your mortgage replaces your existing home loan with a new one — usually at a lower interest rate, sometimes with a shorter term or a different loan type. The move can drop your monthly payment by hundreds of dollars, but you pay closing costs of 2–5% of the loan balance up front. So the real question is not "will my rate go down?" but "how long until the savings outweigh the cost — and will I still own the home when that day comes?"
This mortgage refinance calculator compares your current loan's principal-and-interest payment against the new loan a lender has quoted you, folds in your closing costs, and reports the break-even point plus the net dollar benefit if you sell or refinance again after a planned number of years. Adjust the sliders and every figure updates instantly.
How to Use
- Enter your Current Loan Balance — the principal you still owe, shown on your latest mortgage statement or online portal. Do not use the original purchase amount.
- Type your Current Interest Rate — the APR on the existing loan today. If you are not sure, check your most recent statement; it is usually printed near the top.
- Set Years Left on Current Loan. A 30-year loan taken out 4 years ago has 26 years remaining. This keeps the "what if I did nothing?" baseline honest.
- Enter the New Refinance Rate the lender has quoted you. If you are rate-shopping, test a range ±0.25% because quotes change daily.
- Choose the New Loan Term. Extending a 26-year remainder back out to a fresh 30 years lowers the payment further but pushes payoff out — the calculator shows the trade-off.
- Fill in Refinance Closing Costs — origination, appraisal, title search, recording fees and prepaid escrows. A typical range is 2–5% of the loan balance.
- Set Years You Plan to Stay. If you expect to move in 5 years, the calculator tells you whether the break-even point arrives before you sell — which is the single most important number in the decision.
The result card shows your current and new payments side by side, the monthly savings, the break-even months, the interest saved over your planned stay, and the net benefit (or cost) when you actually move.
The Math Behind the Numbers
Both monthly payments come from the standard amortization formula used by Fannie Mae, Freddie Mac, and every major US lender:
M = P × r(1 + r)ⁿ / ((1 + r)ⁿ − 1)
Where P is the loan balance, r is the monthly rate (annual APR ÷ 12), and n is the number of monthly payments (years × 12). The engine computes the old payment and the new payment separately, then:
- monthlySavings = currentMonthlyPayment − newMonthlyPayment
- breakEvenMonths = closingCosts ÷ monthlySavings
- netBenefitAtSale = monthlySavings × (plannedStayYears × 12) − closingCosts
If the new rate is higher than your current rate, monthly savings comes out negative and the break-even line is suppressed — refinancing in that situation never pays for itself.
Worked example on a $300,000 balance at 6.5% for 30 years, refinanced to 5.5% for a new 30-year term with $6,000 closing costs: the old payment is about $1,896, the new payment is about $1,703, monthly savings is roughly $193, and break-even lands at about 31 months. If you plan to stay 10 years, you save about $23,100 in payments minus the $6,000 closing cost — a net benefit near $17,100.
Why the "Stay" Horizon Matters
Most refinance calculators stop at "you will save $X over the life of the loan." That number is only real if you keep the new loan all the way to payoff. In practice, the average American moves or refinances again every 7–10 years. If your break-even point is 31 months but you plan to move in 24 months, you will have paid the $6,000 closing cost and recovered only about $4,600 in lower payments — you actually lose cash on the deal.
That is why this calculator asks how long you plan to stay. It forces the question: does the break-even date come before my likely move date? If yes, refinancing almost always wins. If no, you may be better off waiting for a lower rate, negotiating a no-cost refinance, or doing nothing.
Examples
Example 1 — The textbook win. A household owes $300,000 at 6.5% on a loan with 30 years left. A bank offers 5.5% on a new 30-year loan with $6,000 closing costs and they expect to stay 10 years. Current P&I is about $1,896, new P&I is about $1,703, monthly savings is about $193, break-even is 31 months, and net benefit at sale is roughly $17,100. They refinance.
Example 2 — The break-even trap. The same household owes $300,000 at 6.5%, but a new 5.5% quote comes with $12,000 in closing costs and they plan to move in 18 months. Monthly savings is still $193, but break-even stretches to 62 months. In 18 months they recover only about $3,500 of the $12,000 — a net loss near $8,500. They should wait or ask the lender for a no-closing-cost quote (which usually builds the fees into the rate).
Example 3 — The seven-figure jumbo loan. A borrower with a $1,000,000 balance at 7.0% refinances to 5.75% on a new 30-year term with $12,000 closing costs and plans to stay 8 years. Current P&I is about $6,653, new P&I is about $5,836, monthly savings is about $817, break-even is 15 months, and net benefit at sale is roughly $66,500. On large balances, even a 1.25% rate drop pays back in well under two years.
FAQ
When does refinancing a mortgage make sense?
Refinancing makes sense when the new rate is at least 0.75–1.0% below your current rate, you plan to stay in the home long enough to pass the break-even point, and your credit and home equity support the new loan. A rule of thumb is that the new rate should beat your old rate by enough to recover closing costs within half the time you expect to live in the home.
How long does it take to break even on a refinance?
Break-even is simply closing costs divided by monthly savings. If you pay $6,000 to close and save $200 a month, you break even in 30 months (about 2.5 years). If closing costs are $12,000 and savings are $150, break-even stretches to 80 months. Use the calculator above with your own numbers — anything longer than your planned stay means refinancing probably loses you money.
Is it worth refinancing to lower my payment by $200?
It depends on how long you will keep the loan. If the closing cost to get that $200/month saving is $4,000, you break even in 20 months and come out ahead after that. If closing costs are $10,000, break-even is 50 months. Always compare the break-even date to how long you plan to own the home; a lower payment is only a win if you hold the loan past the payback point.
Should I refinance into a 15-year or keep a 30-year term?
A 15-year loan usually carries a lower rate but a much higher monthly payment, because you are paying the principal back twice as fast. It is a great deal if your cash flow is comfortable and you want forced savings — it cuts total interest by tens of thousands. Choose the 30-year refinance if you value flexibility, then make extra principal payments manually; you can always pay a 30-year like a 15-year, but you cannot stretch a 15-year payment back out if income drops.
What are typical refinance closing costs?
Lender closing costs usually run 2–5% of the loan balance and cover the origination fee, appraisal, title search and insurance, credit report, recording fees, and prepaid escrows for taxes and insurance. On a $300,000 loan that is $6,000–$15,000. Many lenders offer a "no-closing-cost" refinance, where fees are rolled into the loan or covered by a slightly higher rate — compare both options side by side.
Does refinancing hurt my credit score?
A hard credit pull from a new mortgage application typically drops your score by a few points, but the impact is small and fades within a few months if you keep paying on time. All mortgage inquiries from different lenders within a 14–45-day window are counted as a single inquiry, so rate-shopping does not multiply the hit. Over the long run, refinancing to a lower payment can improve your credit utilization and payment history.
Disclaimer
This mortgage refinance calculator is provided for informational purposes only and does not constitute financial, lending, or tax advice. Estimates are based on the standard amortization formula and the inputs you enter; actual offers, rates, closing costs and APRs vary by lender, credit profile, loan program, location and market conditions. The planned-stay and net-benefit figures are projections, not guarantees. Always compare Loan Estimates from at least three lenders and confirm your final terms directly with a licensed mortgage professional before refinancing.