Mortgage refinance calculator guide
Refinancing replaces an existing mortgage with a new loan. A lower rate can reduce the monthly payment, but closing costs, cash out and restarting or extending the term can increase total cost.
Compare official Loan Estimates using the same loan purpose, term and assumptions. Monthly savings alone do not establish whether refinancing meets your goal.
How to use this refinance calculator
- Enter the current loan: Use the payoff balance, note rate and exact months remaining.
- Enter the new offer: Use the proposed note rate and term from a lender estimate.
- Add closing costs: Include lender and third-party refinance costs.
- Add cash out or PMI: Model amounts that change the new balance or monthly comparison.
- Compare time horizons: Check break-even against how long you expect to keep the loan.
Formula and variables
The model calculates fixed principal-and-interest payments for the remaining current loan and the proposed new loan. Lifetime comparison includes new closing costs.
Break-even months = upfront refinance costs ÷ monthly payment savings- Monthly savings — Current payment minus new payment
- Includes entered PMI amounts. (USD/month)
- Break-even — Cost recovery period
- Months for positive payment savings to recover upfront costs. (months)
Worked example: refinancing a $280,000 balance
Compare 25 years remaining at 6.5% with a new 30-year loan at 5.75% and $6,000 closing costs.
- Current balance
- $280,000
- New term
- 30 years
- Costs
- $6,000
- Calculate both fixed principal-and-interest payments.
- Divide upfront costs by positive monthly savings.
- Compare remaining current interest with new interest plus costs.
Result: A lower payment may still accompany a higher lifetime cost when the term is extended
The appropriate choice depends on the break-even horizon, cash needs and financial goal, not rate alone.
Understanding your results
Monthly change
Current modeled payment minus new modeled payment, including entered PMI.
Break-even
The estimated time for payment savings to recover costs paid upfront. Financed costs have no upfront break-even in this simplified measure.
Lifetime cost difference
Remaining current interest minus new interest and refinance closing costs.
Assumptions
- Both loans are fixed-rate and fully amortizing.
- Payments are made monthly and on time.
- The current balance is the amount refinanced.
Limitations
- The model excludes taxes, insurance, tax effects and investment opportunity cost.
- Actual payoff statements can include accrued interest and fees.
- Cash-out proceeds are not treated as savings.
- Break-even does not measure every financial goal or risk.
Common mistakes
- Resetting to 30 years without comparing total interest.
- Ignoring closing costs or financed fees.
- Using APR as the note rate.
- Counting cash-out proceeds as refinance savings.
Practical use cases
Rate-and-term refinance
Estimate whether payment and interest reductions justify costs.
Cash-out refinance
See how additional borrowing changes the new payment and balance.
Planning and decision guide
Identify the refinance objective first
A rate-and-term refinance may target payment, interest or payoff time. A cash-out refinance deliberately increases the balance to release funds. These are different decisions and should not be evaluated with the same definition of savings.
Watch the amortization clock
Replacing a loan with many fewer months remaining with a new long-term loan can lower the payment while increasing lifetime interest. Compare the proposed term with the exact remaining term, and test a shorter new term when the budget allows.
Compare complete offers, not advertised rates
Obtain written Loan Estimates close together and compare note rate, APR, points, lender credits, cash to close and the five-year cost. A no-closing-cost structure generally shifts cost into the rate, payment or balance rather than eliminating it.
Use break-even as a time-horizon check
A payment-based break-even is useful when savings are positive and costs are paid upfront, but it does not capture every consequence. Consider the planned holding period, equity, cash-out use, tax advice and alternative uses of cash.
Frequently asked questions
When does refinancing break even?
For positive monthly savings, divide upfront closing costs by monthly savings. The result should be compared with how long you expect to keep the new loan.
Does a lower mortgage rate always save money?
No. Closing costs, a longer term, cash out and financed fees can offset rate savings.
Should I roll closing costs into the loan?
Doing so reduces upfront cash but increases principal and usually interest. Compare both Loan Estimate options.
Why can a lower payment cost more overall?
Extending repayment can produce more interest-bearing months even at a lower rate.
Sources and review
- Should I refinance? — Consumer Financial Protection Bureau. Accessed 2026-07-09.
- Compare and negotiate your loan offers — Consumer Financial Protection Bureau. Accessed 2026-07-09.
Reviewed 2026-07-09.