Mortgage Refinance Calculator

Refinancing replaces your current mortgage with a new one — usually to cut the rate, sometimes to change the term. This calculator compares the two loans honestly: both payments, both lifetime costs, the monthly savings, and the break-even point — how many months of savings it takes to earn back the closing costs.

How It Works

1. Current loan. Your remaining balance is amortized over the months you have left at your current rate, giving today's payment and the total you will pay if you change nothing.
2. New loan. The same balance (plus the closing costs, if you choose to roll them in) is amortized at the new rate over the new term.
3. Comparison. Monthly savings are the old payment minus the new. Total savings are the full remaining cost of the current loan minus the full cost of the new loan — where the new loan's cost adds closing costs paid out of pocket; rolled-in costs are instead captured through the larger balance and higher payment.
4. Break-even. Closing costs divided by monthly savings, reported to one decimal place. It is calculated whenever the new payment is lower — using the full closing costs whether you pay them in cash or roll them in, because you bear them either way.

Both loans use the standard amortization formula, with a simple balance-divided-by-months fallback at a 0% rate.

The Formula

$PMT = P \times \frac{r}{1 - (1 + r)^{-n}}, \qquad \text{Break-Even} = \frac{\text{Closing Costs}}{\text{Monthly Savings}}$

Input Parameters

| Parameter | Unit | Description | |---|---|---| | Current Principal | Currency | The balance you owe today. | | Current Interest Rate | % per year | Rate on your existing loan. | | Current Remaining Months | Months | Payments left on the existing loan. | | New Interest Rate | % per year | The refinance offer's rate. | | New Loan Term | Months | Length of the new loan — 360 for 30 years, 180 for 15. | | Closing Costs | Currency | Lender and settlement fees for the new loan. | | Roll Costs Into Loan | Yes / No | Adds the costs to the new balance instead of paying cash. |

Worked Example

You owe $250,000 at 5.5$4,000 in closing costs, paid out of pocket.

• Current payment: **$1,719.72** a month; keeping the loan costs$412,732.38 in total.
• New payment: **$1,581.62** a month; the new loan costs$383,589.63 in total, closing costs included.
• Monthly savings: $138.09. Total savings:$29,142.76.
• Break-even: $4,000 ÷$138.09 = 29.0 months. Stay in the home beyond about two and a half years and the refinance pays for itself; sell before then and it loses money.

Rolling the $4,000 into the loan instead raises the new payment to **$1,606.93** (you are now borrowing $254,000), cuts monthly savings to$112.79, stretches break-even to 35.5 months, and reduces total savings to **$27,069.32** — the$2,073 difference is the interest on financing your own fees for 20 years.

Interpreting the Results

• Break-even versus your plans is the first check. A 29-month break-even is attractive if you will stay five years, and a mistake if you will move in two.
• Total savings is the second check — and the one that exposes term games. Refinancing 20 remaining years into a fresh 30-year term slashes the payment but restarts the clock; total savings can go negative even with a lower rate, because you pay interest for a decade longer.
• Negative monthly savings (the new payment is higher — common when shortening the term) means there is no cash-flow break-even at all; the tool reports none. A shorter-term refinance can still win on total savings, as paying the loan off faster destroys interest cost.

A Note on Rate Drops

Rules of thumb ("refinance when rates fall 1%") are crude substitutes for the break-even calculation. A 0.5% drop on a large balance with low closing costs can break even in under two years, while a 1% drop with heavy fees on a small balance may never pay back before you move. Your balance, your costs and your horizon decide — the three numbers this tool combines.

Limitations

• Principal and interest only. Taxes, insurance and other escrow items are excluded — they continue unchanged under either loan.
• No PMI effects, prepayment penalties or cash-out. Dropping private mortgage insurance can add savings the tool does not count; a prepayment penalty on your current loan should be added to the closing costs you enter.
• Fixed rates, held to term. The comparison assumes both loans run their full course at the stated rates.

Frequently Asked Questions

Should I pay closing costs in cash or roll them into the loan?

Cash, if you can spare it. The worked example shows why: financing $4,000 of fees costs an extra$2,073 in interest over the term and pushes break-even from 29.0 to 35.5 months. Rolling in still beats not refinancing here — it just beats it by less.

How long do I need to stay in the home for a refinance to make sense?

At least until the break-even month — closing costs divided by monthly savings. Beyond that point, every month is pure gain; before it, you have not yet recovered the cost of switching.

Can refinancing ever increase my total cost even with a lower rate?

Yes — by extending the term. Stretching a 20-year remainder into a new 30-year loan adds ten years of interest payments. The monthly payment falls, which feels like saving, but total cost can rise. Watch the total savings figure, not just the payment.