Mortgage refinance calculator

A lower payment is not the same as saving money

Refinancing replaces your current mortgage with a new one. A lower monthly payment can come from a lower rate, but it can also come from restarting the clock on a 30-year term, adding closing costs to the loan or spreading the same debt over more years. The CFPB’s Should I refinance? guide warns that a longer new term could mean a lower monthly payment but paying more in total.

This calculator therefore leads with an equal-horizon comparison: what each option has cost by the time you expect to sell, refinance again or pay off. That cost counts the principal and interest you paid, the closing costs you paid upfront and the balance you would still owe. The monthly payment change and a simple payment break-even appear separately, with labels saying what they leave out.

Use the extra mortgage payment calculator to compare paying extra principal on your current loan instead. The mortgage amortization calculator shows a full schedule for a single loan.

What to enter as closing costs

Enter the one-time costs of refinancing, after lender credits. On page 2 of a Loan Estimate, that is:

• Section D, Total Loan Costs: origination charges including any discount points (A), services you cannot shop for (B) and services you can shop for (C);
• plus Section E, taxes and other government fees, and any required items in Section H, Other;
• minus lender credits, which appear as a negative number in Section J;
• plus any prepayment penalty on your current loan, from your current loan documents.

Leave out Section F, Prepaids (insurance premiums, prepaid interest and property taxes) and Section G, Initial Escrow Payment. Insurance and property taxes are owed whether or not you refinance, escrow deposits are your money held for those bills and your current servicer refunds its escrow balance after payoff. Leave out items in Section H labeled “(optional)”, such as home warranties. The CFPB’s Loan Estimate guide defines each section.

Points lower the rate in exchange for more upfront cost; lender credits do the reverse and cost more over time (CFPB). A so-called no-cost refinance usually means a higher rate or costs added to the loan (CFPB). This calculator doesn’t model cash-out refinancing or lender credits larger than your closing costs.

You choose whether the costs are paid in cash at closing or added to the new loan. Financed costs are counted once: they raise the new balance and the interest you pay on it, not your cash cost.

How the comparison works

Both loans use the same monthly ledger. Interest on the opening balance is the annual note rate divided by 100 and then 12, rounded half up to the nearest cent. Each month pays the regular payment, capped at what is owed, so a loan’s final payment is never larger than its regular payment.

Your current loan keeps your entered principal-and-interest payment; its remaining length is however many payments that takes. The new loan’s payment is the smallest whole-cent payment that repays it within its term. Rounding a standard payment formula to the nearest cent can leave a balance at the end of the term, so this model raises the payment just enough instead of adding a large final payment. A lender’s quoted payment can differ because of its own rounding, fees or loan terms; the Loan Estimate is authoritative. At very high rates and long terms, the smallest workable payment can repay the loan before the end of its term, and the result says so.

For each month, the savings from refinancing are the cost of keeping your loan minus the cost of refinancing: payments made plus balance owed, plus upfront costs for the refinance. This equals the interest you would save minus your closing costs.

• Break-even is the first month after which refinancing has cost no more than keeping your loan, all the way through your horizon. If savings dip below zero again before the horizon, the earlier month does not count.
• Coming out ahead means savings above $0. Breaking even means both options have cost the same.
• Simple payment break-even is closing costs divided by the monthly payment reduction, the worksheet method in the Federal Reserve’s refinancing guide. It ignores how much you still owe and any change in loan length, so it can look better than the full comparison.

Dollar inputs allow up to two decimal places and $100 million. Rates allow 0–25% with up to six decimal places. Terms and horizons are whole years from 1 to 50. Your current loan must repay within 600 monthly payments at its current payment. Unsupported values are rejected, never rounded silently.

Example: a lower rate that restarts the clock

You owe $300,000 at 7% with a $2,128.97 principal-and-interest payment, which repays the loan in 297 more payments. A new 30-year loan at 6% has $6,000 in closing costs paid upfront, and you expect to keep it 10 years.

• The new payment is $1,798.66, $330.31 lower. The simple payment break-even is 19 months.
• Counting balances, refinancing breaks even after 25 months and comes out $16,987.49 ahead after 10 years.
• The new loan takes 63 months longer to repay. Kept to payoff, refinancing would cost $21,763.70 more; savings turn negative at month 285.

The same refinance into a 15-year loan raises the payment by $402.61, so there is no simple payment break-even. Yet it breaks even after 22 months, comes out $14,685.24 ahead after 5 years and $170,063.89 ahead if both loans run to payoff. Adding the $6,000 to the 30-year loan instead gives a $1,834.63 payment, a 29-month break-even and $13,649.43 ahead after 10 years.

Limits

This compares principal and interest on two fixed-rate loans. It excludes taxes, the mortgage interest deduction, homeowners insurance, escrow, mortgage insurance, cash-out, home value and the time value of money. It does not model prepayment-penalty rules, accrued interest in a payoff quote, the timing of your first new payment, adjustable rates or loan eligibility. If your current rate can change, this models only today’s rate. Prepayment penalties depend on your loan’s terms (CFPB).

Frequently asked questions

Educational estimate, not financial advice or a loan offer. Actual rates, closing costs, payments and loan terms come from your lender's Loan Estimate. Taxes, escrow and loan eligibility are not modeled.