Mortgage Refinance Calculator

When refinancing a mortgage makes sense

Refinancing replaces your current home loan with a new one. People do it to get a lower interest rate, to lower the monthly payment, to pay the house off faster with a shorter term, or to switch from an adjustable to a fixed rate. Every refinance has closing costs, typically 2–6% of the loan, so the real question is whether the savings outweigh those costs within the time you expect to keep the loan.

Payment = B × r ÷ (1 − (1 + r)^−n) (r = annual rate ÷ 12, n = months)
Monthly saving = current payment − new payment
Break-even (months) = closing costs ÷ monthly saving
Lifetime difference = current payment × months left − (new payment × new months + costs paid at closing)

Worked example

You owe $300,000 at 7.25% with 27 years left. A lender offers 6% on a new 30-year loan with $6,000 in closing costs paid at closing.

• Current payment (principal and interest): $2,112.58 a month.
• New payment: $1,798.65, a saving of $313.93 a month.
• Break-even: $6,000 ÷ $313.93 = 20 months. If you sell or refinance again before then, the refinance loses money.
• Interest still to pay falls from $384,476.57 to $347,514.57. Including the closing costs, you pay $30,962 less in total, even though the new loan runs three years longer.

Rolling closing costs into the loan

Many lenders let you add the costs to the new balance instead of paying cash. In the example the loan becomes $306,000, the payment is $1,834.62 (a saving of $277.96 a month) and the total saving drops to about $24,012, because you now pay interest on the costs for 30 years. A "no-closing-cost" refinance usually works the same way through a slightly higher rate.

Refinancing to a shorter term

Choosing a 15-year loan at the same 6% raises the payment to $2,531.57, about $419 a month more than today, but the house is paid off 12 years sooner and the total still to pay falls by about $222,794. A shorter term is the strongest way to cut interest if the higher payment fits your budget.

Watch the reset of the clock

Going back to a fresh 30-year term lowers the payment partly by stretching the debt. If you have already paid for several years, a new 30-year loan can end up costing more interest overall even at a lower rate. Compare the "total still to pay" line, not only the monthly payment, or pick a term close to the years you have left.

Other things to check

• How long you will stay. Moving within the break-even period makes a refinance a loss.
• Points. Paying discount points buys a lower rate but lengthens the break-even. Add them to the closing costs here.
• PMI. If your home has gained value, a refinance may remove mortgage insurance, adding to the saving.
• Cash-out refinancing raises the balance and is a different decision: you are borrowing more against your home.

A quick rule of thumb

An old guideline says refinancing is worth it when the new rate is at least one percentage point lower. With today's closing costs the break-even month is a better test: if you are confident you will keep the loan well past it, even a smaller rate cut can pay off; if you may move within two or three years, even a large cut may not. Also compare the APR on each Loan Estimate, which spreads the lender's fees over the loan and makes offers easier to compare.

Common mistakes

• Comparing only monthly payments. A longer term almost always lowers the payment.
• Ignoring escrow. Taxes and insurance stay the same after a refinance; this calculator compares principal and interest only.
• Not shopping around. Rates and fees vary between lenders; compare official Loan Estimates.

Estimates only. Your lender's Loan Estimate shows the official rate, APR and closing costs.

Frequently asked questions

Sources

• Consumer Financial Protection Bureau (consumerfinance.gov). Refinancing: what to consider.
• Freddie Mac. Refinancing your mortgage: costs and break-even.
• Consumer Financial Protection Bureau. Loan Estimate explainer.

Last reviewed 27 October 2026. Results are estimates; see our disclaimer.