The formula
How it works
Work out whether refinancing your mortgage is worth it. The calculator compares your current payment with a new one, and shows the monthly saving, the lifetime saving, and how long it takes to earn back the closing costs.
FAQ
What is the break-even point?
It is how many months of lower payments it takes to recover the closing costs of the refinance. If you plan to stay in the home well past the break-even point, refinancing usually pays off.
Does a longer new term really save money?
It lowers the monthly payment, but resetting to a longer term can increase the total interest even at a lower rate. Compare the lifetime cost, not just the monthly payment, before deciding.
What do closing costs on a refinance typically include?
Common items are the loan origination fee, appraisal, title search and insurance, and recording fees, usually totaling 2–5% of the loan amount. Some lenders offer a “no-closing-cost” refinance that rolls these into the balance or the rate instead of charging them upfront.
How much lower does the new rate need to be to make refinancing worthwhile?
There is no fixed threshold — it depends on the closing costs, how long you will keep the loan, and the size of your balance. A common rule of thumb is looking for at least a 0.5–1 percentage point drop, but the break-even point this calculator shows is the more reliable test.
What is a cash-out refinance?
It replaces your mortgage with a larger one and gives you the difference in cash, using your home equity as the source of funds. This calculator assumes the new loan simply replaces the balance, so add any cash-out amount to the balance before comparing.
Does my credit score affect the new rate I qualify for?
Yes — lenders price mortgages largely on credit score, along with loan-to-value ratio and debt-to-income ratio. A stronger score since you took out the original loan is one of the most common reasons refinancing becomes worthwhile.
Can I roll the closing costs into the new loan instead of paying upfront?
Many lenders let you add closing costs to the new balance rather than paying cash at closing. That raises the amount you are financing and the total interest paid, so it is worth comparing against paying costs out of pocket if you can afford to.
About the refinance calculator
This calculator helps you decide whether refinancing your mortgage makes financial sense. Refinancing replaces your current loan with a new one, usually at a lower rate, but it comes with closing costs that you have to earn back through the savings. By comparing the old and new payments and weighing them against the upfront cost, this tool shows the monthly saving and the break-even point — the moment the refinance starts paying for itself.
How to use it
Enter your current loan balance, interest rate and years remaining, then the new rate, new term and the closing costs of the refinance. The calculator shows your old and new monthly payments, the monthly saving, the break-even point in months, and the total interest saved over the life of the loan. For example, dropping from 7% to 5.5% on a $250,000 balance could save a few hundred dollars a month and recoup $4,000 of costs in well under two years.
The formula
Both payments come from the amortization formula, . The monthly saving is the old payment minus the new one, and the break-even point is — how many months of savings it takes to cover the upfront cost. Comparing the total interest over each loan’s remaining life shows the lifetime effect, which can differ from the monthly saving if the term changes.
Where it is used
Homeowners use it whenever rates fall or their credit improves, to check if refinancing is worth the fees. Mortgage brokers use the same comparison to advise clients, and it is central to deciding between keeping a loan and replacing it. The break-even point is the key number: if you will move or pay off the loan before then, refinancing may cost more than it saves.