Mortgage Refinance Calculator

Mortgage Refinance Calculator

Refinancing can lower your monthly payment, reduce the total interest you pay, or let you tap home equity — but closing costs mean you need to stay in the home long enough to break even. This calculator computes your monthly savings, the exact break-even point in months, and total lifetime savings so you can make a data-driven refinance decision.

How Refinance Savings Are Calculated

Monthly payments for both the current and new loan use the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n - 1], where P is principal, r is the monthly rate, and n is the number of payments. The key output figures are:

• Monthly savings = Current Payment - New Payment
• Break-even months = Closing Costs / Monthly Savings
• Lifetime interest savings = Total interest on current loan (remaining) - Total interest on new loan
• Net lifetime savings = Lifetime interest savings - Closing Costs

For example: $280,000 balance, current rate 7.00%, refinancing to 5.75% over a new 30-year term, $5,200 closing costs. Current monthly P&I = $1,863; new payment = $1,634. Monthly savings = $229. Break-even = 5,200 / 229 = 23 months. If you stay 10 years, net savings = $27,480 - $5,200 = $22,280.

Worked Examples

Example 1 — Rate-and-term refi, staying long-term. Balance $350,000, rate drops from 7.25% to 5.875%, 30-year refi, $6,500 closing costs. Payment falls from $2,389 to $2,072. Monthly savings = $317. Break-even = 21 months. Net 10-year savings = $38,040 - $6,500 = $31,540.

Example 2 — Refinancing to a 15-year term. Balance $250,000, current rate 6.75% with 22 years left, refinancing to 15-year at 5.50%, $4,500 closing. Current payment = $1,732; new 15-year payment = $2,042. Monthly payment increases $310, but total interest falls from $257,000 to $117,600. Net savings vs continuing current loan = $122,400 — at the cost of a higher monthly outlay.

Example 3 — Short-hold refi, questionable case. Balance $200,000, rate drops from 6.50% to 5.75%, $5,800 closing costs, planning to sell in 2 years. Monthly savings = $96. After 24 months: $2,304 saved vs $5,800 paid. Net = -$3,496. Refinancing does not make sense here.

Refinance Scenarios Reference Table

When to Use This Calculator

• You have received a new rate offer and want to know how many months before you start actually saving money net of closing costs.
• You are weighing a rate-and-term refinance against a cash-out refinance and need to compare total costs.
• You have a high rate from 2022—2023 and want to quantify the savings from refinancing as rates have declined.
• You are considering shortening to a 15-year term and want to see the trade-off between a higher monthly payment and dramatically lower lifetime interest.
• You are comparing lender offers with different rate/closing-cost combinations and need a consistent way to evaluate them.

Common Mistakes

1. Using the full remaining term for break-even but a short stay horizon. If you plan to sell in 3 years but the break-even is 36 months, you barely break even — unexpected early sales or job moves will put you in the red. Always stress-test the break-even against a shorter stay.
2. Ignoring PMI changes. Refinancing into a loan with a higher loan-to-value can add PMI ($80—$180/month on a $250,000 loan), which can erase the rate savings entirely. Confirm your LTV before calculating savings.
3. Resetting to a full 30-year term without accounting for the extra years. Refinancing a $280,000 balance with 22 years left into a new 30-year loan adds 8 years of payments. Run both a 30-year and 20-year version to see the full picture.
4. Comparing payments without comparing total costs. A lower monthly payment looks attractive, but if it extends the loan by 8 years, total interest paid can be $50,000—$80,000 more than just staying with the current loan.

Current Context for 2026

After the Federal Reserve’s rate-hold cycle through 2025, 30-year fixed mortgage rates in early 2026 are ranging from 6.25% to 7.00% for well-qualified borrowers. Homeowners who locked in rates above 7.25% in 2022—2023 now have a meaningful refinance opportunity. A drop from 7.25% to 6.00% on a $300,000 balance saves approximately $248/month, with a typical break-even under 24 months given standard $5,500—$6,500 closing costs. Lenders are offering competitive no-closing-cost options in the 6.50%—6.75% range for borrowers who prefer to avoid upfront fees.

Tips

• Target at least a 0.75% rate reduction before starting the refinance process — smaller drops often struggle to clear closing costs within a reasonable break-even window.
• Request Loan Estimates from at least three lenders on the same day; rates can vary 0.25—0.375% between lenders on identical loan profiles.
• If you have fewer than 10 years left on your current mortgage, refinancing to a new 30-year term is rarely a good idea — the amortization reset means paying far more interest overall.
• Ask each lender for both a standard closing-cost option and a no-closing-cost option; compare the break-even on each to find which fits your timeline.
• Factor escrow changes: refinancing often resets your impound account, which may require depositing 2—6 months of taxes and insurance upfront beyond the standard closing costs.
• Keep an eye on your credit score before applying — a score above 740 unlocks the best pricing tier at most lenders, potentially worth 0.125—0.25% compared to a 700 score.

Related Calculations

• Mortgage Points Calculator — compare buying down the rate on your refi vs accepting the par rate
• Mortgage Payment Calculator — calculate the new payment at any rate
• Amortization Calculator — see the full payoff schedule on the refinanced loan
• Mortgage Payoff Calculator — see how extra payments on the new loan further reduce your costs