Mortgage Refinance Calculator
Compare your current mortgage with refinancing options to see if it makes financial sense. Currently calculating in US Dollar.
Current Mortgage
New Mortgage
Refinancing could save you money!
You could save $83,787 over the life of the loan.
New Monthly Payment
$1,804
-$296/mo
Lifetime Savings
$83,787
savings
Break-Even Point
1.4 years
to recoup closing costs
| Metric | Current | Refinanced | Difference |
|---|---|---|---|
| Monthly Payment | $2,100 | $1,804 | -$296 |
| Loan Term | 25 years | 25 years | 0 years |
| Interest Rate | 7.5% | 6% | -1.50% |
| Total Remaining Cost | $630,000 | $546,213 | -$83,787 |
| Closing Costs | - | $5,000 | - |
A mortgage refinance calculator is a specialized financial tool that helps you determine whether refinancing your current mortgage makes financial sense. Refinancing means taking out a new loan to pay off your existing mortgage, typically at a lower interest rate or with different terms that better suit your financial situation.
This calculator analyzes the complete financial picture of refinancing, including your current loan balance, existing interest rate, remaining term, and the new loan terms you're considering. It calculates your new monthly payment, total interest paid, closing costs, and most importantly, whether you'll actually save money when you factor in refinancing costs.
The break-even analysis is crucial—it shows how many months it will take for your monthly savings to offset the upfront costs of refinancing. This helps you determine if you'll be in the home long enough to realize the savings from refinancing.
Enter Current Loan Balance
Input the remaining balance on your current mortgage. You can find this on your latest mortgage statement.
Input Current Interest Rate
Enter your current annual interest rate. This is the rate you're paying on your existing mortgage.
Specify Current Monthly Payment
Enter your current monthly mortgage payment amount (principal and interest only).
Set Years Remaining on Current Loan
Indicate how many years are left on your current mortgage. For example, if you have a 30-year mortgage and are 5 years in, you have 25 years remaining.
Enter New Interest Rate
Input the new interest rate you're being offered by the refinance lender.
Choose New Loan Term
Select the number of years for your new loan. You can choose the same term or a different one based on your financial goals.
Add Closing Costs
Enter the estimated refinancing costs (typically 2-5% of the loan amount, ranging from $3,000-$15,000).
Review Results
Examine your monthly payment savings, total savings, break-even point, and comparison charts to make an informed decision.
New Monthly Payment Formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- M = New monthly mortgage payment
- P = Current loan balance (principal remaining)
- r = New monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Total number of new payments (new term × 12)
Break-Even Calculation:
Break-Even Months = Closing Costs ÷ Monthly Savings
This shows how many months it takes for your payment savings to offset the upfront refinancing costs. Once you reach this break-even point, you start realizing net savings.
Total Savings Calculation:
Total Savings = (Current Total Remaining) - (New Total + Closing Costs)
This represents the total amount you'll save by refinancing over the remaining loan period, accounting for all costs involved.
Scenario 1: Rate Drop - Same Term
Current Mortgage:
• Balance: $280,000
• Interest Rate: 7.5%
• Monthly Payment: $2,100
• Years Remaining: 25
New Refinance:
• New Rate: 6.0%
• New Term: 25 years
• Closing Costs: $5,000
New Monthly Payment: $1,682
Monthly Savings: $418
Break-Even: 12 months
Total Savings Over 25 Years: $120,400
Scenario 2: Shorter Term Refinance
Current Mortgage:
• Balance: $280,000
• Interest Rate: 7.5%
• Monthly Payment: $2,100
• Years Remaining: 25
New Refinance:
• New Rate: 6.5%
• New Term: 15 years (shorter)
• Closing Costs: $4,500
New Monthly Payment: $2,269
Monthly Cost Increase: $169
Break-Even: 27 months
Total Savings Over 15 Years: $315,660
Higher monthly payment but significantly less total interest
Scenario 3: Minimal Rate Drop (Not Recommended)
Current Mortgage:
• Balance: $280,000
• Interest Rate: 7.0%
• Monthly Payment: $1,996
• Years Remaining: 25
New Refinance:
• New Rate: 6.75%
• New Term: 25 years
• Closing Costs: $5,500
New Monthly Payment: $1,947
Monthly Savings: $49
Break-Even: 112 months (9.3 years)
⚠️ Longer break-even means refinancing may not be worthwhile
- •Check Your Credit Score First: A higher credit score qualifies you for better interest rates. Pull your credit report and dispute any errors before applying to refinance.
- •Target Break-Even Period: Refinance only if your break-even period is less than 5 years (60 months). This gives you a reasonable timeframe to recover costs.
- •Get Multiple Quotes: Shop with at least 3-5 lenders to compare rates and fees. Even small differences add up to significant savings.
- •Understand All Costs: Beyond interest, refinancing includes appraisal fees, title insurance, underwriting, and processing fees. Ask for a complete loan estimate.
- •Consider Shorter Terms: Refinancing to a 15-year mortgage significantly reduces total interest, though it increases monthly payments.
- •Plan Your Timeline: Only refinance if you plan to stay in your home long enough to break even. Moving soon after refinancing means you lose money.
- •Negotiate Closing Costs: Lenders sometimes have flexibility on fees. Ask about fee waivers or lender credits to reduce your out-of-pocket costs.
- •Lock Your Rate: Once you find a good rate, lock it immediately. Rates change daily, and a rate lock protects you during the approval process.
When is the best time to refinance?
Generally, refinance when rates drop 1% or more below your current rate, or when your credit score has improved significantly. Also consider refinancing 2-3 years before selling your home to maximize savings.
How long does refinancing take?
The refinancing process typically takes 30-45 days from application to closing. This includes appraisal, underwriting, title search, and final approval. Some lenders offer expedited processing.
What are typical refinancing closing costs?
Closing costs typically range from 2-5% of your loan amount. For a $280,000 refinance, expect $5,600-$14,000 in costs including appraisal, inspection, underwriting, title insurance, and lender fees.
Can I refinance with bad credit?
It's harder with bad credit, but possible. However, you'll likely get a higher interest rate, which may negate the benefits of refinancing. Consider improving your credit score first if possible.
What's the difference between a rate-and-term and cash-out refinance?
Rate-and-term refinance changes only your rate and/or term. Cash-out refinance lets you borrow against your equity and receive funds. This guide focuses on rate-and-term refinancing.
Can I refinance if I'm underwater on my mortgage?
Being underwater (owing more than the home is worth) makes traditional refinancing difficult. However, some government programs like HARP may help. Consult with a lender about your specific situation.
What happens to my escrow account when I refinance?
Your current lender must refund any escrow balance when you refinance. The new lender will establish a new escrow account for taxes and insurance on the new loan.
Should I do a no-closing-cost refinance?
No-closing-cost refinances roll fees into your interest rate, meaning you pay more over time. Calculate whether the trade-off makes sense for your situation using this calculator.
Types of Refinancing
Rate-and-Term Refinance: Changes your interest rate and/or loan term without borrowing additional funds. This is the most common type.
Cash-Out Refinance: Allows you to borrow against your home's equity and receive the difference in cash. Useful for large expenses but increases your loan amount.
Streamline Refinance: Available for FHA, VA, and USDA loans. Simplified process with fewer requirements and lower costs.
How Interest Rate Changes Impact You
Even small rate differences create substantial savings. For a $280,000 loan over 25 years:
- • At 7.5%: Monthly = $2,100, Total Interest = $340,000
- • At 6.5%: Monthly = $1,952, Total Interest = $295,600
- • At 5.5%: Monthly = $1,820, Total Interest = $255,000
- • Difference of 1% saves $85,400 in interest!
The Break-Even Analysis
This is the most critical number in refinancing. It tells you exactly how many months until your monthly payment savings offset your upfront refinancing costs. If the break-even period is longer than you plan to own your home, refinancing doesn't make financial sense. For example, if break-even is 36 months and you plan to sell in 24 months, skip the refinance.
Shortening Your Loan Term
Many homeowners refinance from a 30-year to a 15-year mortgage. While monthly payments increase, total interest paid decreases dramatically. For example, refinancing to a 15-year term can save over $150,000 in interest compared to remaining on a 30-year path, even if the interest rate is slightly higher.
Building Home Equity Faster
Shorter-term refinances mean more of each payment goes toward principal, building equity faster. This accelerates your path to owning your home outright. Over 15 years instead of 30, you reduce your loan balance twice as fast.
The Role of Credit Score
Your credit score directly affects your refinance interest rate. Here's how credit ranges typically affect rates:
- • 760+: Best rates (current market rate)
- • 700-759: Near-best rates (0.25-0.5% higher)
- • 660-699: Fair rates (0.75-1% higher)
- • Below 660: Difficult to refinance or higher rates
Improving your credit before refinancing can save tens of thousands of dollars.
Avoiding Common Refinancing Mistakes
Extending Your Term: Refinancing from 10 years remaining to 30 years costs much more in total interest, even if monthly payments decrease.
Ignoring Fees: High closing costs can eliminate your savings. Always calculate your break-even period.
Multiple Inquiries in Short Time: Applying with multiple lenders for quotes is fine (counts as one inquiry within 45 days), but random applications hurt your credit.
Not Shopping Around: Different lenders offer vastly different rates and fees. Always compare options to get the best deal.
Explore More Tools
Discover other calculators in Loans & Mortgages to help with your financial planning
Mortgage
Calculate monthly mortgage payments and total interest
Personal Loan
Estimate personal loan payments
Home Affordability
Find out how much house you can afford
Auto Loan
Calculate car loan payments
Car Affordability
Find out how much car you can afford
Student Loan
Plan student loan repayment