Refinance Calculator

What Is Refinancing?

A refinance is a swap, not a top-up. On the day it closes, the new lender pays your old mortgage off in full, and from that moment you owe the new one instead. Because it is a genuinely new loan it carries a new origination — appraisal, title search, underwriting, recording — and those charges are what the closing-costs box exists to capture.

The Five Figures This Calculator Needs

Everything the tool asks for sits on two documents: your current mortgage statement and the Loan Estimate from the lender making the offer.

• Remaining loan balance — the payoff figure on your statement. Not what the house is worth, and not what you originally borrowed.
• Current P&I payment — the principal-and-interest line only. If your monthly bill includes escrow for taxes and insurance, that part is not being refinanced and must be left out.
• New interest rate — the note rate on the offer, not the APR. The APR already blends fees into the rate, and the fees belong in the last box.
• New term — a four-button segmented control offering 30, 20, 15 or 10 years. It opens on 30 years.
• Closing costs — the dollar total the lender quotes. This one is a text box, arrives pre-filled with 4000, and tolerates a typed dollar sign and commas.

Nothing else is asked for, which is worth knowing before you go hunting for paperwork. The tool never learns your current interest rate, how many years remain on the loan you have, or what the property is now worth — and three sections below turn on exactly those gaps.

Why It Wants Your P&I Payment, Not Your Whole Bill

Most homeowners know one payment figure: the amount that leaves the bank each month. On an escrowed loan that number bundles property tax and homeowners insurance, often mortgage insurance too. None of it is being refinanced. Taxes and insurance are owed on the house, not on the loan, and they carry across untouched to whichever lender ends up holding the note.

Entering the escrowed total instead of the P&I line inflates the answer badly. On the worked example below, a true P&I of $1,520 produces $100.53/month saved and a 40-month break-even. Swap in a $1,900 escrowed payment against the same $250,000 balance and the panel reports $480.53/month saved with a break-even of 9 months — a refinance that looks nearly five times better than it is, from one wrong box.

What People Refinance For

Cutting the rate is the common case and the one this tool is built around. It is not the only reason a mortgage gets replaced.

• A lower rate, which reduces the payment, the lifetime interest, or both.
• A shorter term — trading a higher payment for far less interest. The calculator handles the arithmetic but reports it as a non-result; the term section explains why.
• Escaping an adjustable rate before it adjusts, where what you are buying is certainty rather than an immediate saving.
• Dropping mortgage insurance. The CFPB's rules let you request PMI cancellation once the balance is scheduled to reach 80 percent of the home's original value, and oblige the servicer to end it automatically at 78 percent — so equity growth alone may remove it without any refinance at all.
• Cash-out, where the new balance is deliberately larger than the old one. The savings framing stops applying, and the limits section says what to do instead.

To rebuild your current payment from the original loan, or to price a purchase rather than a swap, start with the Mortgage Calculator.

How Do You Calculate a Refinance?

Three answers come out of one standard formula and two subtractions. The formula is ordinary amortization — the same arithmetic behind any fixed-rate loan — applied to the balance you still owe rather than to an original purchase price.

The Formula and the Two Lines Built on It

newPmt = balance × r ÷ (1 − (1 + r)^−n)

r = newRate ÷ 100 ÷ 12     (the monthly rate)
n = years × 12            (the number of new payments)

savings   = currentPmt − newPmt
breakEven = closing ÷ savings, rounded up to a whole month
totalNew  = newPmt × n + closing

• balance is the amount still owed, so the new schedule is built on today's payoff figure and never on the original loan.
• r is a monthly decimal, not an annual percentage: 5.5% becomes 5.5 ÷ 100 ÷ 12 = 0.00458333.
• n counts payments rather than years — a 30-year term is 360 of them, a 10-year term 120.
• savings is a pure payment comparison. It says nothing about how fast either loan repays principal.
• breakEven divides the costs by that saving and rounds up. It measures cash recovered, not value created.

The bracketed part is an annuity factor: the fraction of the balance that has to change hands each month so the interest is covered and the balance still lands exactly on zero after the final payment. Alter the number of payments and that fraction moves, which is why the term buttons shift the monthly figure as forcefully as the rate does.

Step by Step

By hand it takes about a minute on any calculator with a power key.

• Divide the new rate by 100, then by 12. That is the monthly rate.
• Multiply the new term in years by 12. That is the number of payments.
• Raise one plus the monthly rate to the power of minus that number, keeping every decimal you can.
• Subtract the result from 1, then divide the monthly rate by what is left.
• Multiply by the remaining balance. That is the new monthly payment.
• Subtract the new payment from your current principal-and-interest payment. That is the monthly saving.
• Divide the closing costs by that saving and round up to the next whole month. That is the break-even.
• Multiply the new payment by the number of payments and add the closing costs. That is the total.

Step three is where hand arithmetic drifts, because the exponent is negative and the answer carries a long decimal tail. The calculator holds full precision the whole way through and rounds only at the moment it prints, which is why multiplying its own displayed payment back out does not quite reproduce its total.

Worked Example: $250,000 at 5.5% for 30 Years

A balance of $250,000 outstanding, a current principal-and-interest payment of $1,520, an offer of 5.5% fixed over 30 years, and $4,000 of quoted closing costs.

r = 5.5 ÷ 100 ÷ 12 = 0.00458333
n = 30 × 12 = 360

newPmt = 250,000 × 0.00458333 ÷ (1 − 1.00458333^−360)
       = 1,419.4725…

Monthly savings

$100.53/month saved

Beneath that headline the panel prints the new payment of $1,419.47 against the current $1,520, a break-even of 40 months against the $4,000 of costs, and a total of $515,010 for every new payment plus those costs. Forty months is $4,000 divided by $100.5274…, which comes to 39.79 and is rounded up, because nobody breaks even part way through a payment.

Why the Break-Even Is Always a Whole Month

The break-even rounds up, never to the nearest month. The rounding always runs in the cautious direction, so the true crossover is at worst one month earlier than the panel shows and never later.

Two things follow. Thin savings produce coarse answers — at $21.12 a month the break-even is 190 months, and each month of recovery buys only $21.12, so a $21 difference in the cost quote is worth a whole month on that line and a $250 difference is worth a year. And the figure counts months of holding this loan, not months of owning the house: refinancing a second time resets the clock just as thoroughly as selling does.

Refinance Chart: Savings and Break-Even by Rate

Every row below is the calculator's own output for one loan — $250,000 outstanding, a current principal-and-interest payment of $1,520, a 30-year term and $4,000 of closing costs — with nothing changed but the offered rate.

The break-even column collapses far faster than the rate falls. From 6% to 5% the rate moves a single point while the recovery time drops from 190 months to 23, because the saving in the denominator is growing while the costs in the numerator sit perfectly still. Anyone judging an offer by the size of the rate cut alone is reading the least sensitive number on the page.

Where the Chart Stops

The top two rows are not savings at all. At 6.25% the new payment on this balance is $1,539.29, and at 6.5% it is $1,580.17 — both above the current $1,520 — so the calculator declines to report a saving and shows an amber notice in place of a result. The crossover for this loan sits just above 6.13%: at 6.13% the panel still reports a saving, of seventeen cents, and by 6.14% it has turned amber.

Locating that boundary for your own loan is a useful first move. Raise the rate in small steps until the panel turns amber and you have found the highest rate at which a same-balance, same-term refinance still lowers your payment. Every offer above it is a term extension or a rate rise wearing the costume of a saving.

The Same Refinance as a Running Total

A break-even is one point on a line. Here is the whole line for the 5.5% row — the saving accumulating at $100.5274 a month, set against the $4,000 handed over at closing.

Three full years in, this refinance is still $381 down. Its entire case sits in the years after that, which makes the honest question not whether the numbers look good but whether you will still be holding this exact loan in four years' time. Households move and rates fall again, and either event stops the accumulation at whatever row it had reached.

What Closing Costs Do to the Break-Even

Closing costs are the only input that touches the break-even directly, and they are the one people guess at. The Federal Reserve's consumer guide states the range plainly: "It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees." On a $250,000 balance that is $7,500 to $15,000.

The calculator's own panel quotes a narrower band — leave the box at zero and it replies that "most refis run 2–5% of the balance", which on the same balance means $5,000 to $12,500. Neither range is a quote for your loan. The only figure that belongs in the box is the total closing costs shown on the Loan Estimate the lender is obliged to give you.

Break-Even by Closing Cost

Hold the 5.5% offer completely still — $250,000 balance, $1,520 current payment, 30-year term, $100.53 a month saved — and move only the cost figure.

The relationship is a straight line: at this saving, every extra $1,000 of cost adds very close to ten months. That is why a quote is worth arguing over. Talking $4,000 down to $2,500 pulls the crossover forward by fifteen months without moving the rate by a single basis point, and unlike the rate it is a negotiation you can still have after the offer is on paper.

What “No Closing Costs” Actually Means

There is no such thing as a free origination. The CFPB describes the two ways a no-cost offer gets built: "One way is by charging you a higher interest rate and giving you a credit to cover the cost of making the loan", and "The other way is by adding the closing costs to your loan amount." Both are enterable here, and both surface in the total.

Held to term, the higher-rate version costs $10,205 more than paying cash and the rolled-in version $4,176 more. Neither shows a break-even, because neither has anything to recover — which is the appeal, and also what hides the price.

Short holding periods flip the ranking. Counting cash alone, paying the $4,000 up front does not overtake the 5.75% no-cost version until month 102, and does not overtake the rolled-in version until month 177. If you expect to sell or refinance again inside eight years, the no-cost structure is not a trick being played on you; it is the cheaper choice, and the totals above are simply what it costs if you stay.

Entering the Costs Correctly

The costs box is a text field rather than a number field, which makes it the most forgiving input on the page — occasionally too forgiving.

• Everything that is not a digit or a decimal point is stripped, so “$4,000” and “4,000 dollars” both register as $4,000.
• It arrives pre-filled with 4000. That is a demonstration of the shape of the answer, not an estimate of your costs.
• A blank box or a zero means no costs: the break-even line is replaced by the reminder about typical percentages, and the total drops to the payments alone.
• A minus sign is stripped along with everything else, so -4000 is read as $4,000. There is no way to enter a lender credit as a negative figure here.
• A percentage is not understood. Type 2% and it is read as two dollars, and the panel duly reports a break-even of one month.

That last one is the trap worth watching, because a percentage is exactly how closing costs get discussed. Convert to dollars before you type, then check the answer against the panel's echo of the figure it actually used.

Refinance Examples: One Rate Drop, Seven Balances

The old rule of thumb says refinance when rates fall a full point below yours. Whether a point is enough turns out to depend far more on the size of the balance than on the size of the point. Each row below is the calculator's output for a loan currently at 6.5% refinanced to 5.5%, both over 30 years, with costs of $1,500 in fixed fees plus 1% of the balance.

One identical rate cut takes 39 months to pay for itself on $100,000 and 21 months on $500,000. The rule of thumb is not so much wrong as incomplete: on a small balance a full point may not be enough, and on a large one half a point often is.

Why the Rule Depends on Fees, Not on Size

The usual explanation — bigger loans save more, so they recover their costs faster — is only half of it. The saving scales with the balance, but so does most of the cost. Take out the fixed fees, charge a flat 2% of the balance instead, and the break-even stops moving altogether.

Thirty-two months at every balance. When costs are purely proportional the break-even in months is blind to loan size; the balance matters only to the extent that appraisal, title work and recording cost the same dollars whether the loan is $100,000 or half a million. That fixed slice is what makes a small refinance expensive — and it is why, on a small balance, the first thing to negotiate is the fee schedule rather than the rate.

Comparing Two Real Offers

Run each offer through separately and compare four things instead of one. Enter both with the same balance and the same term, or you are ranking two different loans and calling it a rate comparison.

• The monthly saving — the headline, and the least informative of the four.
• The break-even — how long the fees take to come back.
• The total of new payments plus costs — where a longer term finally shows itself.
• Whether the term matches what you actually have left to run.

The Loan Estimate exists for precisely this comparison: a standardized form, laid out identically at every lender, so the cost lines sit in the same place on every quote. The CFPB's instruction is to "Request multiple Loan Estimates from different lenders so you can compare and choose the loan that's right for you", and it points to Freddie Mac research finding that homebuyers can save $600 to $1,200 a year by gathering offers from more than one.

Collecting quotes does not cost you a credit score. Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single inquiry, so four lenders in a fortnight register the same as one.

To watch how either offer actually retires the balance month by month rather than only what it costs, run it through the Loan Repayment Calculator.

How to Read Your Result

A successful run returns four lines: the headline saving and three breakdown rows. Nothing recalculates as you type. The tool runs when you press Calculate, and it runs once on load only when every box already holds a value — which never happens here, because the balance, current payment and rate boxes all start empty.

The Four Lines

On the worked example — $250,000, $1,520, 5.5%, 30 years, $4,000 — the panel returns exactly these:

• $100.53/month saved
• New payment $1,419.47 ($250,000 → 30y at 5.5%) vs current $1,520
• Break-even: 40 months to recover $4,000 closing costs
• Total of new payments + costs: $515,010 — resetting a 30-year clock can cost lifetime interest even while the payment drops

The first line is the one people screenshot; the last is the one that decides things. That total is every payment of the new loan added together plus the closing costs — $1,419.4725… multiplied by 360, plus $4,000. It is compared against nothing, because the calculator has no idea what your current loan would have cost you over the same stretch. Supplying that missing half is what the term-reset section does.

Formatting Details Worth Knowing

Three display habits will otherwise look like faults.

• Trailing zeros are dropped. A saving of exactly $160.70 prints as $160.7, and a current payment of $948.10 is echoed back as $948.1.
• The total is rounded to whole dollars and computed from the unrounded payment. Multiply the displayed $1,419.47 by 360 and add $4,000 and you get $515,009.20; the panel prints $515,010, because it multiplies $1,419.4725… and rounds once at the end.
• The sentence trailing the total always says “resetting a 30-year clock”, even when the term selected was 20, 15 or 10 years. It is fixed wording, not a reading of your choice.

None of this changes the arithmetic, but it does mean that copying a figure out of the panel and multiplying it by hand lands a dollar or so away from the panel's own answer. Round once, at the end, and the two agree.

When the Panel Turns Amber

If the new payment is not lower than the current one, the calculator does not report a negative saving. It replaces the entire result with an amber “Check your inputs” notice carrying a single line — for instance “The new loan pays $2,042.71/month — no monthly savings vs your $1,748.04. A shorter term can still cut lifetime interest; run the totals below”.

That line still holds the number you came for, the new payment, so a term-shortening refinance is not unanswerable here, merely unrewarded. Take its closing instruction with a pinch of salt: no totals are printed in this state, because the calculator stops before it computes any. Three other messages use the same amber panel — “Enter the remaining loan balance” when that box is empty or zero, “Enter your current principal-and-interest payment” when that one is, and “Enter the new interest rate” when the rate is negative or above 30.

Where the First New Payment Goes

The panel reports cash flow, not equity. On the worked example the new payment is $1,419.47, and in its very first month $1,145.83 of that is interest — the $250,000 balance multiplied by 5.5% and divided by twelve — leaving $273.64 to reduce the principal.

Across the 40 months to break-even the new loan retires $11,983 of principal and the balance falls to $238,017. Whether that beats what your current loan would have retired over the same 40 months depends on its rate and its remaining term, neither of which this tool is ever told. When the new term is close to the old remaining term the two schedules track each other within a few dollars; when twenty remaining years are replaced by a fresh thirty, the new loan pays down noticeably slower and the cash break-even flatters the deal.

The Term Reset: Why a Lower Payment Can Cost More

The four term buttons are the most consequential control on the page. Choosing 30 years when 20 remain does not simply lower the payment; it lengthens the debt, and a good part of what shows up as a saving is nothing more than the bill arriving later.

The Same Balance at Four Terms

A $250,000 balance left over from a loan written at 7.5% — a current principal-and-interest payment of $1,748.04 — refinanced at 5.5% with $4,000 of costs, altering nothing but the term:

The best-looking row is the worst deal. Thirty years saves $328.57 a month and recovers its fees in just over a year; twenty years saves $28.32 and takes almost twelve. Yet the twenty-year loan costs $98,278 less by the end.

Because the calculator stops at the amber notice on the last two rows, it never prints their totals. By hand — payment multiplied by months, plus the $4,000 — the fifteen-year loan comes to $371,688 and the ten-year to $329,579. Stated as interest alone, the same $250,000 costs $261,010 over thirty years, $162,732 over twenty, $117,688 over fifteen and $75,579 over ten.

The Number the Calculator Cannot Show You

None of the five inputs tells the tool how long your current loan has left to run, so its total has no counterpart to be measured against. You have to supply that yourself, and the arithmetic is trivial: multiply your current principal-and-interest payment by the number of payments still remaining on the loan you already have.

Take a $260,000 balance with twenty years left and a payment of $2,100 — roughly what a loan of that size costs at 7.53%. Refinanced at 5.5% over thirty years with $5,000 of closing costs, the panel is emphatic: $623.75/month saved, break-even in 9 months, total $536,451. Staying put costs $2,100 × 240, which is $504,000. The refinance that pays for itself inside nine months ends up $32,451 more expensive than doing nothing at all.

Choose the 20-year term on exactly the same offer and the picture inverts: $311.49/month saved, break-even in 17 months, total $434,242 — $69,758 less than staying put. Same balance, same rate, same lender, same $5,000 of closing costs. The only thing that changed was which term button was selected.

Refinancing Into a Shorter Term

A term-shortening refinance nearly always raises the payment, which is why this calculator files it as a non-result. That does not make it a poor trade; it makes it a different one. You are not buying monthly relief, you are buying the removal of years of interest, and the break-even framing simply does not apply, because there is no monthly saving out of which the fees could be recovered.

Judge one this way instead: read the new payment out of the amber notice, satisfy yourself you can carry it every month without strain, then compare lifetime totals rather than break-evens. On the ladder above, moving from a fresh thirty to a fresh fifteen costs $623.24 a month more and removes $143,323 of interest — a trade nobody would call a saving and most people would take if the cash flow allowed.

The Slower Payoff Behind the Bigger Saving

Stretching the term also slows how fast you build equity, and the panel never mentions it. On the $260,000 example, two years after the refinance the new thirty-year loan still owes $252,798 while the old twenty-year schedule would have been down to $247,930 — a gap of $4,868.

Set that against $14,970 of cash saved over the same two years and the trade still favors refinancing on the cash view, which is the honest way to put it: the equity gap is real, it is smaller than the saving in the early years, and it widens steadily afterwards. It bites hardest if you sell, because the gap comes out of the sale proceeds while the saved cash has long since been spent.

Limits: When This Calculator Does Not Apply

The tool answers one question well — does this offer lower this payment, and how long until the fees come back — and stays silent on several others that decide whether a refinance is actually a good idea.

Four Terms, Fixed Rate, Monthly Payments

The four term buttons offer 30, 20, 15 and 10 years and nothing else. There is no 25-year option, no custom length, and no way to model a refinance that preserves your existing remaining term — which is, unhelpfully, the comparison that isolates the rate benefit most cleanly. With 23 years left, the fair reading is that the 20-year row overstates your payment and the 30-year row understates your total.

The rate is treated as fixed for the whole of the new term. An adjustable-rate offer can be typed in at its introductory rate, but every figure that comes back then describes only the introductory period, and the break-even in particular becomes meaningless if the rate resets before it arrives.

A Blank Rate Box Reads as 0%

The balance and current-payment boxes both refuse to run when empty. The rate box does not. Leave it blank, press Calculate, and the tool treats the empty field as zero percent and returns a full, confident answer — on the worked example, $825.56/month saved with a break-even of 5 months.

The giveaway sits in the second line, which prints the rate straight back at you: “New payment $694.44 ($250,000 → 30y at 0%) vs current $1,520”. If you see “at 0%” and did not type a zero, the box was empty. Rates above 30 are turned away outright, so the guard exists — it just has a hole at the bottom of the range.

What the Break-Even Leaves Out

Closing costs divided by monthly saving is the standard method, and an official one — the VA gives borrowers the identical instruction for its own refinance, telling them to "divide your closing costs by how much you expect to save every month by refinancing to see if it's worth it." It is still only a cash calculation, and several real costs and benefits sit outside it.

• How fast principal is repaid. Two loans can show the same payment gap and retire the balance at very different speeds; the break-even counts only the cash.
• What the $4,000 could have done elsewhere. Money handed over at closing stops earning, and nothing here discounts for that.
• Tax treatment. The IRS is explicit that “points you pay to refinance a mortgage aren't deductible in full in the year you pay them” — they are generally spread across the life of the new loan instead.
• Mortgage insurance. If the refinance removes PMI, your true monthly saving is larger than the principal-and-interest gap measured here.
• A prepayment penalty on the loan being paid off, which is a genuine cost of refinancing and has no box on this page.
• Whether you will be approved at all. Nothing among the five inputs touches credit, income, or what the property is now worth.

Cash-Out and Debt Consolidation

A cash-out refinance replaces a smaller loan with a larger one, and this calculator can only be made to describe it awkwardly. Enter the new, higher balance and the payment it returns will be perfectly correct, but the “saving” against your old payment is then measuring two different debts against each other. The break-even goes with it: the fees are no longer being recovered out of a saving, they are being added to a loan.

The same caution covers folding credit-card balances into a mortgage. The monthly figure almost always falls, because short-term unsecured debt is being restretched across thirty secured years; whether the total falls is an entirely separate sum, and the house is now standing behind the answer.

Before assuming a cash-out is even available, check how much of the house you own outright with the Home Equity Calculator.

One Deadline the Panel Never Mentions

Refinancing a home you live in generally carries a federal right of rescission, which the CFPB describes as a right that “gives you three business days to cancel a non-purchase money mortgage agreement.” It does not cover every transaction — purchase mortgages are excluded, and some refinances with your existing lender are treated differently — so confirm it at the closing table rather than assuming it.

It is worth knowing because the arithmetic often only lands afterwards. If the total on this panel startles you the evening after closing, there is a short window in which being startled is still actionable.

If the real aim is clearing expensive short-term debt rather than lowering a mortgage payment, price that on its own terms first with the Credit Card Payoff Calculator.