Refinancing replaces your existing home loan with a new one — usually to grab a lower interest rate, switch from an adjustable rate to a fixed one, or pull cash out for a renovation. The catch is that a refinance is not free: you pay closing costs again, often 2% to 5% of the loan balance. This refinance calculator compares your current monthly payment with the new one, then tells you exactly how many months it takes for the monthly savings to repay those closing costs. That payback period is the single most important number in the refinance decision.
Enter your remaining balance, today's rate, and how many years are left, then type the new rate and term a lender quoted you. The result card shows your old payment, your new payment, the monthly savings, the break-even point, and the total interest you stand to save over the life of the new loan.
How to Use
- Enter the Remaining Loan Balance — the unpaid principal on your current mortgage, shown on your latest statement or your lender's portal.
- Set your Current Interest Rate to the APR you are paying today. If you have an adjustable-rate loan, use the rate you are paying right now.
- Enter the Years Left on Current Loan. A 30-year loan taken out 7 years ago has roughly 23 years left — that is the remaining payment schedule you would otherwise continue.
- Type the New Refinance Rate a lender quoted you. If you have only one quote, test a range of ±0.25% to see how sensitive your savings are.
- Pick the New Loan Term. A 30-year stretch lowers the payment the most, but a 15- or 20-year term usually earns a deeper rate discount and saves far more interest.
- Add the Refinance Closing Costs — origination fee, appraisal, title search, and recording fees. If you were quoted a "no-cost" refinance, enter 0 (the cost is then built into the rate instead).
The card then compares the two payments. Monthly Savings is the difference; Break-Even (Months) is simply closing costs divided by that monthly savings. If you plan to sell or move before you reach break-even, the refinance loses money.
The Math Behind the Numbers
Both the old and new monthly payments come from the standard amortization formula every lender uses:
M = P × r(1 + r)ⁿ / ((1 + r)ⁿ − 1)
Where P is the loan balance, r is the monthly rate (annual APR divided by 12), and n is the number of monthly payments. With a $250,000 balance at 7.5% with 23 years left, the monthly payment is about $1,903. Refinancing that same balance to 6.25% over 20 years brings the payment to roughly $1,827 — only $76 of monthly savings, but the shorter term cuts total interest by tens of thousands.
The break-even calculation is deliberately simple:
Break-even months = closing costs ÷ monthly savings
On a $4,500 closing cost with $76 of monthly savings, break-even is about 59 months — nearly five years. Stay in the home past that point and every month after is pure savings. Leave sooner and the closing cost eats the benefit.
When Refinancing Makes Sense
A refinance is usually worth it when you can lower the rate by at least 0.75 to 1.0 percentage point, you plan to keep the home well past the break-even date, and your credit and equity support a competitive quote. It is less attractive when you are already deep into the loan — most of the early payments went to interest, so refinancing resets that clock and you start paying interest on a fresh schedule again.
Stretching the balance back to a new 30-year term lowers the payment but can increase the total interest you pay, even at a lower rate. The calculator's "Total Savings Over the New Loan" line accounts for that trade-off honestly.
Examples
Example 1 — A modest rate drop, long horizon. A homeowner owes $250,000 at 7.5% with 23 years left. A lender offers 6.25% on a 20-year refinance with $4,500 in closing costs. The current payment is $1,903; the new payment is $1,827; monthly savings are $76; break-even is about 59 months. Because they expect to stay 8+ years, the deal works.
Example 2 — A clear win. A family owes $400,000 at 8.0% on a 30-year loan. They refinance to 6.5% for 30 years with $5,000 in closing costs. The payment drops from $2,935 to $2,528 — $407 per month — and break-even arrives in just 12 months. Total interest saved over the new loan is about $141,000.
Example 3 — High-balance jumbo refinance. On a $1,200,000 balance at 7.5% with 26 years left, refinancing to 6.0% over a fresh 30-year term with $6,000 in costs cuts the payment from $8,753 to $7,195 — $1,558 of monthly savings, reaching break-even in under 4 months. The longer term does add back some interest, which is why comparing both the monthly and total figures matters.
FAQ
How many months until I break even on a refinance?
Divide your refinance closing costs by your new monthly savings. For example, $4,500 in closing costs and $76 of monthly savings means break-even at about 59 months. If you will sell or move before that date, the refinance does not pay off.
What is a good refinance interest rate?
"Good" depends on your credit score, loan-to-value ratio, and the day's market. A useful benchmark is roughly 0.75 to 1.0 percentage point below your current rate. Check the national average for your credit profile and treat anything at least three-quarters of a point lower as a meaningful offer.
Is it worth refinancing to lower the payment but extend the term?
It lowers the payment, but stretching the balance back to a new 30-year term can increase total interest even at a lower rate. Use the "Total Savings Over the New Loan" figure — if it is positive, the deal is sound; if negative, the monthly relief is bought with more interest over time.
How much are refinance closing costs?
Typically 2% to 5% of the loan balance, covering the origination fee, home appraisal, title search, credit report, and recording fees. On a $250,000 loan that is roughly $5,000 to $12,500. Some lenders offer "no-closing-cost" loans where the fees are rolled into the rate or balance instead.
When should I not refinance?
Skip it if you plan to move before the break-even date, if the new rate is within 0.5% of your current rate, if your credit has worsened since you bought, or if refinancing would reset a loan you are nearly done paying off — you would restart the front-loaded interest phase.
Does refinancing hurt my credit?
A hard credit inquiry from the new lender usually causes a small, temporary dip. Rate-shopping multiple lenders within a roughly 14- to 45-day window is generally counted as a single inquiry, so gather quotes quickly rather than spacing them out over months.
Disclaimer
This refinance calculator is provided for informational purposes only and does not constitute financial, lending, or tax advice. Estimates use the standard amortization formula and your entered inputs; actual offers, APRs, closing costs, and escrow terms vary by lender, credit profile, location, and program. Always confirm your final rate, fees, and projected break-even date directly with a licensed mortgage professional before refinancing.