finance calculator

Refinance Calculator

Estimate refinance savings, compare new vs old amortizations, and find your fee break-even month.

Bookmark this refinance calculator

Mortgage rates change daily. Save this calculator to rerun savings as lenders update their terms.

Saved runs

Inputs

Current Loan Details

Original loan amount ($)$

Current interest rate (%)%

Original term (years)years

Months already paidmonths

New Refinance Loan Details

New interest rate (%)%

New term (years)years

Estimated closing costs ($)$

Roll closing costs into new loan principal

Closing Cost Break-Even Recovery Calendar

Month	Projected Date	Cumulative Savings / Balance	Status
Month 0	Immediate	-$6,000	Upfront Costs Paid
Month 1	Jul 2026	-$5,657	Recovering Costs
Month 6	Dec 2026	-$3,939	Recovering Costs
Month 12	Jun 2027	-$1,879	Recovering Costs
Month 18	Dec 2027	+$182	Net Savings Gain
Month 24	Jun 2028	+$2,243	Net Savings Gain
Month 36	Jun 2029	+$6,364	Net Savings Gain
Month 48	Jun 2030	+$10,485	Net Savings Gain
Month 60	Jun 2031	+$14,606	Net Savings Gain

Results

Current monthly payment$1,896

New monthly payment$1,553

Monthly payment change

Saves $343/mo

Estimated remaining balance$289,252

Refinance Impact

New loan principal$289,252

Break-even timeline17.5 months

Total net savings

$49,374

Formula

Refinance Savings Formula

Net Savings = (Current Payment × Remaining Months) - (New Payment × Refinance Term Months) - Upfront Fees

Net refinance savings are calculated by comparing the remaining payments left on the existing loan against the total payments of the new loan plus any upfront closing costs (unless rolled into the loan principal, which decreases savings through higher interest).

Step by step

How the calculation works

1Find your current mortgage payment, original interest rate, and original term.
2Specify the number of months already paid on the existing mortgage.
3Calculate the remaining principal balance using the amortizing remaining balance formula.
4Enter the interest rate and term for the proposed new mortgage.
5Determine closing costs and choose if you want to roll them into the new mortgage.
6Calculate the new payment and subtract it from the old payment to find monthly cash flow change.
7Compare the total cost of the new loan plus fees to the remaining payments of the old loan to compute net savings.
8Divide the closing costs by the monthly savings to find your break-even period in months.

Example

Example Refinance Scenario

A homeowner has a $300,000 30-year mortgage at 6.0%. After 3 years (36 months), the balance is $285,431 and they refinance to a new 30-year term at 4.5% with $5,000 in closing costs. The monthly payment drops from $1,799 to $1,446, saving $353 per month. The break-even period is $5,000 / $353 = 14.2 months, with a lifetime net savings of $55,389.

Related guides

Learn more about this calculation

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Mortgage Amortization: How Each Payment Splits Principal and Interest

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finance calculator

Refinance Calculator

Estimate refinance savings, compare new vs old amortizations, and find your fee break-even month.

Bookmark this refinance calculator

Mortgage rates change daily. Save this calculator to rerun savings as lenders update their terms.

Saved runs

Inputs

Current Loan Details

Original loan amount ($)$

Current interest rate (%)%

Original term (years)years

Months already paidmonths

New Refinance Loan Details

New interest rate (%)%

New term (years)years

Estimated closing costs ($)$

Roll closing costs into new loan principal

Closing Cost Break-Even Recovery Calendar

Month	Projected Date	Cumulative Savings / Balance	Status
Month 0	Immediate	-$6,000	Upfront Costs Paid
Month 1	Jul 2026	-$5,657	Recovering Costs
Month 6	Dec 2026	-$3,939	Recovering Costs
Month 12	Jun 2027	-$1,879	Recovering Costs
Month 18	Dec 2027	+$182	Net Savings Gain
Month 24	Jun 2028	+$2,243	Net Savings Gain
Month 36	Jun 2029	+$6,364	Net Savings Gain
Month 48	Jun 2030	+$10,485	Net Savings Gain
Month 60	Jun 2031	+$14,606	Net Savings Gain

Results

Current monthly payment$1,896

New monthly payment$1,553

Monthly payment change

Saves $343/mo

Estimated remaining balance$289,252

Refinance Impact

New loan principal$289,252

Break-even timeline17.5 months

Total net savings

$49,374

Summary

Key output metrics

Current payment (P&I)

$1,896

Old loan payment.

New payment (P&I)

$1,553

Refinanced payment.

Monthly savings

$343

Decrease in payment.

Total net savings

$49,374

Including closing costs.

D3 visualization

Monthly payment comparison

Compare the principal and interest payment of your current loan with the estimated new loan.

D3 visualization

Total cost of borrowing

Compare the remaining cost to pay off your old loan versus the new loan including closing costs.

Full amortization schedule

Principal, interest, and balance timeline

Monthly view shows the full exact schedule. Quarterly and yearly views summarize the same monthly schedule. Weekly view is a weekly equivalent split for quick planning.

360 monthly payments360 rows shown

Swipe sideways to view all columns.

Period	Payment	Principal	Interest	Balance
Month 1	$1,553	$348	$1,205	$288,904
Month 2	$1,553	$349	$1,204	$288,555
Month 3	$1,553	$350	$1,202	$288,205
Month 4	$1,553	$352	$1,201	$287,853
Month 5	$1,553	$353	$1,199	$287,499
Month 6	$1,553	$355	$1,198	$287,145
Month 7	$1,553	$356	$1,196	$286,788
Month 8	$1,553	$358	$1,195	$286,430
Month 9	$1,553	$359	$1,193	$286,071
Month 10	$1,553	$361	$1,192	$285,710
Month 11	$1,553	$362	$1,190	$285,348
Month 12	$1,553	$364	$1,189	$284,984
Month 13	$1,553	$365	$1,187	$284,619
Month 14	$1,553	$367	$1,186	$284,252
Month 15	$1,553	$368	$1,184	$283,884
Month 16	$1,553	$370	$1,183	$283,514
Month 17	$1,553	$371	$1,181	$283,142
Month 18	$1,553	$373	$1,180	$282,769
Month 19	$1,553	$375	$1,178	$282,395
Month 20	$1,553	$376	$1,177	$282,019
Month 21	$1,553	$378	$1,175	$281,641
Month 22	$1,553	$379	$1,174	$281,262
Month 23	$1,553	$381	$1,172	$280,881
Month 24	$1,553	$382	$1,170	$280,498
Month 25	$1,553	$384	$1,169	$280,114
Month 26	$1,553	$386	$1,167	$279,729
Month 27	$1,553	$387	$1,166	$279,341
Month 28	$1,553	$389	$1,164	$278,953
Month 29	$1,553	$390	$1,162	$278,562
Month 30	$1,553	$392	$1,161	$278,170
Month 31	$1,553	$394	$1,159	$277,776
Month 32	$1,553	$395	$1,157	$277,381
Month 33	$1,553	$397	$1,156	$276,984
Month 34	$1,553	$399	$1,154	$276,585
Month 35	$1,553	$400	$1,152	$276,185
Month 36	$1,553	$402	$1,151	$275,783
Month 37	$1,553	$404	$1,149	$275,379
Month 38	$1,553	$405	$1,147	$274,974
Month 39	$1,553	$407	$1,146	$274,567
Month 40	$1,553	$409	$1,144	$274,158
Month 41	$1,553	$410	$1,142	$273,748
Month 42	$1,553	$412	$1,141	$273,336
Month 43	$1,553	$414	$1,139	$272,922
Month 44	$1,553	$416	$1,137	$272,506
Month 45	$1,553	$417	$1,135	$272,089
Month 46	$1,553	$419	$1,134	$271,670
Month 47	$1,553	$421	$1,132	$271,249
Month 48	$1,553	$423	$1,130	$270,826
Month 49	$1,553	$424	$1,128	$270,402
Month 50	$1,553	$426	$1,127	$269,976
Month 51	$1,553	$428	$1,125	$269,548
Month 52	$1,553	$430	$1,123	$269,118
Month 53	$1,553	$431	$1,121	$268,687
Month 54	$1,553	$433	$1,120	$268,254
Month 55	$1,553	$435	$1,118	$267,819
Month 56	$1,553	$437	$1,116	$267,382
Month 57	$1,553	$439	$1,114	$266,943
Month 58	$1,553	$441	$1,112	$266,503
Month 59	$1,553	$442	$1,110	$266,060
Month 60	$1,553	$444	$1,109	$265,616
Month 61	$1,553	$446	$1,107	$265,170
Month 62	$1,553	$448	$1,105	$264,722
Month 63	$1,553	$450	$1,103	$264,273
Month 64	$1,553	$452	$1,101	$263,821
Month 65	$1,553	$454	$1,099	$263,367
Month 66	$1,553	$455	$1,097	$262,912
Month 67	$1,553	$457	$1,095	$262,455
Month 68	$1,553	$459	$1,094	$261,995
Month 69	$1,553	$461	$1,092	$261,534
Month 70	$1,553	$463	$1,090	$261,071
Month 71	$1,553	$465	$1,088	$260,606
Month 72	$1,553	$467	$1,086	$260,139
Month 73	$1,553	$469	$1,084	$259,671
Month 74	$1,553	$471	$1,082	$259,200
Month 75	$1,553	$473	$1,080	$258,727
Month 76	$1,553	$475	$1,078	$258,252
Month 77	$1,553	$477	$1,076	$257,776
Month 78	$1,553	$479	$1,074	$257,297
Month 79	$1,553	$481	$1,072	$256,816
Month 80	$1,553	$483	$1,070	$256,333
Month 81	$1,553	$485	$1,068	$255,849
Month 82	$1,553	$487	$1,066	$255,362
Month 83	$1,553	$489	$1,064	$254,873
Month 84	$1,553	$491	$1,062	$254,382
Month 85	$1,553	$493	$1,060	$253,890
Month 86	$1,553	$495	$1,058	$253,395
Month 87	$1,553	$497	$1,056	$252,898
Month 88	$1,553	$499	$1,054	$252,399
Month 89	$1,553	$501	$1,052	$251,898
Month 90	$1,553	$503	$1,050	$251,394
Month 91	$1,553	$505	$1,047	$250,889
Month 92	$1,553	$507	$1,045	$250,382
Month 93	$1,553	$510	$1,043	$249,872
Month 94	$1,553	$512	$1,041	$249,361
Month 95	$1,553	$514	$1,039	$248,847
Month 96	$1,553	$516	$1,037	$248,331
Month 97	$1,553	$518	$1,035	$247,813
Month 98	$1,553	$520	$1,033	$247,293
Month 99	$1,553	$522	$1,030	$246,770
Month 100	$1,553	$525	$1,028	$246,246
Month 101	$1,553	$527	$1,026	$245,719
Month 102	$1,553	$529	$1,024	$245,190
Month 103	$1,553	$531	$1,022	$244,659
Month 104	$1,553	$533	$1,019	$244,126
Month 105	$1,553	$536	$1,017	$243,590
Month 106	$1,553	$538	$1,015	$243,052
Month 107	$1,553	$540	$1,013	$242,512
Month 108	$1,553	$542	$1,010	$241,970
Month 109	$1,553	$545	$1,008	$241,425
Month 110	$1,553	$547	$1,006	$240,878
Month 111	$1,553	$549	$1,004	$240,329
Month 112	$1,553	$551	$1,001	$239,778
Month 113	$1,553	$554	$999	$239,224
Month 114	$1,553	$556	$997	$238,668
Month 115	$1,553	$558	$994	$238,110
Month 116	$1,553	$561	$992	$237,549
Month 117	$1,553	$563	$990	$236,986
Month 118	$1,553	$565	$987	$236,421
Month 119	$1,553	$568	$985	$235,853
Month 120	$1,553	$570	$983	$235,283
Month 121	$1,553	$572	$980	$234,711
Month 122	$1,553	$575	$978	$234,136
Month 123	$1,553	$577	$976	$233,559
Month 124	$1,553	$580	$973	$232,979
Month 125	$1,553	$582	$971	$232,397
Month 126	$1,553	$584	$968	$231,813
Month 127	$1,553	$587	$966	$231,226
Month 128	$1,553	$589	$963	$230,637
Month 129	$1,553	$592	$961	$230,045
Month 130	$1,553	$594	$959	$229,451
Month 131	$1,553	$597	$956	$228,854
Month 132	$1,553	$599	$954	$228,255
Month 133	$1,553	$602	$951	$227,653
Month 134	$1,553	$604	$949	$227,049
Month 135	$1,553	$607	$946	$226,442
Month 136	$1,553	$609	$944	$225,833
Month 137	$1,553	$612	$941	$225,221
Month 138	$1,553	$614	$938	$224,607
Month 139	$1,553	$617	$936	$223,990
Month 140	$1,553	$619	$933	$223,370
Month 141	$1,553	$622	$931	$222,748
Month 142	$1,553	$625	$928	$222,124
Month 143	$1,553	$627	$926	$221,496
Month 144	$1,553	$630	$923	$220,866
Month 145	$1,553	$632	$920	$220,234
Month 146	$1,553	$635	$918	$219,599
Month 147	$1,553	$638	$915	$218,961
Month 148	$1,553	$640	$912	$218,321
Month 149	$1,553	$643	$910	$217,678
Month 150	$1,553	$646	$907	$217,032
Month 151	$1,553	$648	$904	$216,383
Month 152	$1,553	$651	$902	$215,732
Month 153	$1,553	$654	$899	$215,078
Month 154	$1,553	$657	$896	$214,422
Month 155	$1,553	$659	$893	$213,762
Month 156	$1,553	$662	$891	$213,100
Month 157	$1,553	$665	$888	$212,435
Month 158	$1,553	$668	$885	$211,768
Month 159	$1,553	$670	$882	$211,097
Month 160	$1,553	$673	$880	$210,424
Month 161	$1,553	$676	$877	$209,748
Month 162	$1,553	$679	$874	$209,069
Month 163	$1,553	$682	$871	$208,388
Month 164	$1,553	$684	$868	$207,703
Month 165	$1,553	$687	$865	$207,016
Month 166	$1,553	$690	$863	$206,326
Month 167	$1,553	$693	$860	$205,633
Month 168	$1,553	$696	$857	$204,937
Month 169	$1,553	$699	$854	$204,238
Month 170	$1,553	$702	$851	$203,536
Month 171	$1,553	$705	$848	$202,831
Month 172	$1,553	$708	$845	$202,124
Month 173	$1,553	$711	$842	$201,413
Month 174	$1,553	$714	$839	$200,700
Month 175	$1,553	$717	$836	$199,983
Month 176	$1,553	$720	$833	$199,263
Month 177	$1,553	$723	$830	$198,541
Month 178	$1,553	$726	$827	$197,815
Month 179	$1,553	$729	$824	$197,087
Month 180	$1,553	$732	$821	$196,355
Month 181	$1,553	$735	$818	$195,621
Month 182	$1,553	$738	$815	$194,883
Month 183	$1,553	$741	$812	$194,142
Month 184	$1,553	$744	$809	$193,398
Month 185	$1,553	$747	$806	$192,652
Month 186	$1,553	$750	$803	$191,901
Month 187	$1,553	$753	$800	$191,148
Month 188	$1,553	$756	$796	$190,392
Month 189	$1,553	$759	$793	$189,633
Month 190	$1,553	$763	$790	$188,870
Month 191	$1,553	$766	$787	$188,104
Month 192	$1,553	$769	$784	$187,335
Month 193	$1,553	$772	$781	$186,563
Month 194	$1,553	$775	$777	$185,787
Month 195	$1,553	$779	$774	$185,009
Month 196	$1,553	$782	$771	$184,227
Month 197	$1,553	$785	$768	$183,442
Month 198	$1,553	$788	$764	$182,653
Month 199	$1,553	$792	$761	$181,862
Month 200	$1,553	$795	$758	$181,067
Month 201	$1,553	$798	$754	$180,268
Month 202	$1,553	$802	$751	$179,467
Month 203	$1,553	$805	$748	$178,662
Month 204	$1,553	$808	$744	$177,853
Month 205	$1,553	$812	$741	$177,042
Month 206	$1,553	$815	$738	$176,227
Month 207	$1,553	$818	$734	$175,408
Month 208	$1,553	$822	$731	$174,586
Month 209	$1,553	$825	$727	$173,761
Month 210	$1,553	$829	$724	$172,932
Month 211	$1,553	$832	$721	$172,100
Month 212	$1,553	$836	$717	$171,264
Month 213	$1,553	$839	$714	$170,425
Month 214	$1,553	$843	$710	$169,582
Month 215	$1,553	$846	$707	$168,736
Month 216	$1,553	$850	$703	$167,886
Month 217	$1,553	$853	$700	$167,033
Month 218	$1,553	$857	$696	$166,176
Month 219	$1,553	$860	$692	$165,316
Month 220	$1,553	$864	$689	$164,452
Month 221	$1,553	$868	$685	$163,585
Month 222	$1,553	$871	$682	$162,713
Month 223	$1,553	$875	$678	$161,839
Month 224	$1,553	$878	$674	$160,960
Month 225	$1,553	$882	$671	$160,078
Month 226	$1,553	$886	$667	$159,192
Month 227	$1,553	$889	$663	$158,303
Month 228	$1,553	$893	$660	$157,410
Month 229	$1,553	$897	$656	$156,513
Month 230	$1,553	$901	$652	$155,612
Month 231	$1,553	$904	$648	$154,708
Month 232	$1,553	$908	$645	$153,800
Month 233	$1,553	$912	$641	$152,888
Month 234	$1,553	$916	$637	$151,972
Month 235	$1,553	$920	$633	$151,052
Month 236	$1,553	$923	$629	$150,129
Month 237	$1,553	$927	$626	$149,202
Month 238	$1,553	$931	$622	$148,271
Month 239	$1,553	$935	$618	$147,336
Month 240	$1,553	$939	$614	$146,397
Month 241	$1,553	$943	$610	$145,454
Month 242	$1,553	$947	$606	$144,507
Month 243	$1,553	$951	$602	$143,557
Month 244	$1,553	$955	$598	$142,602
Month 245	$1,553	$959	$594	$141,644
Month 246	$1,553	$963	$590	$140,681
Month 247	$1,553	$967	$586	$139,714
Month 248	$1,553	$971	$582	$138,744
Month 249	$1,553	$975	$578	$137,769
Month 250	$1,553	$979	$574	$136,790
Month 251	$1,553	$983	$570	$135,808
Month 252	$1,553	$987	$566	$134,821
Month 253	$1,553	$991	$562	$133,830
Month 254	$1,553	$995	$558	$132,834
Month 255	$1,553	$999	$553	$131,835
Month 256	$1,553	$1,003	$549	$130,832
Month 257	$1,553	$1,008	$545	$129,824
Month 258	$1,553	$1,012	$541	$128,812
Month 259	$1,553	$1,016	$537	$127,796
Month 260	$1,553	$1,020	$532	$126,776
Month 261	$1,553	$1,025	$528	$125,751
Month 262	$1,553	$1,029	$524	$124,723
Month 263	$1,553	$1,033	$520	$123,689
Month 264	$1,553	$1,037	$515	$122,652
Month 265	$1,553	$1,042	$511	$121,610
Month 266	$1,553	$1,046	$507	$120,564
Month 267	$1,553	$1,050	$502	$119,514
Month 268	$1,553	$1,055	$498	$118,459
Month 269	$1,553	$1,059	$494	$117,400
Month 270	$1,553	$1,064	$489	$116,336
Month 271	$1,553	$1,068	$485	$115,268
Month 272	$1,553	$1,072	$480	$114,196
Month 273	$1,553	$1,077	$476	$113,119
Month 274	$1,553	$1,081	$471	$112,037
Month 275	$1,553	$1,086	$467	$110,951
Month 276	$1,553	$1,090	$462	$109,861
Month 277	$1,553	$1,095	$458	$108,766
Month 278	$1,553	$1,100	$453	$107,666
Month 279	$1,553	$1,104	$449	$106,562
Month 280	$1,553	$1,109	$444	$105,454
Month 281	$1,553	$1,113	$439	$104,340
Month 282	$1,553	$1,118	$435	$103,222
Month 283	$1,553	$1,123	$430	$102,099
Month 284	$1,553	$1,127	$425	$100,972
Month 285	$1,553	$1,132	$421	$99,840
Month 286	$1,553	$1,137	$416	$98,703
Month 287	$1,553	$1,142	$411	$97,562
Month 288	$1,553	$1,146	$407	$96,416
Month 289	$1,553	$1,151	$402	$95,265
Month 290	$1,553	$1,156	$397	$94,109
Month 291	$1,553	$1,161	$392	$92,948
Month 292	$1,553	$1,165	$387	$91,783
Month 293	$1,553	$1,170	$382	$90,612
Month 294	$1,553	$1,175	$378	$89,437
Month 295	$1,553	$1,180	$373	$88,257
Month 296	$1,553	$1,185	$368	$87,072
Month 297	$1,553	$1,190	$363	$85,882
Month 298	$1,553	$1,195	$358	$84,687
Month 299	$1,553	$1,200	$353	$83,487
Month 300	$1,553	$1,205	$348	$82,282
Month 301	$1,553	$1,210	$343	$81,072
Month 302	$1,553	$1,215	$338	$79,857
Month 303	$1,553	$1,220	$333	$78,637
Month 304	$1,553	$1,225	$328	$77,412
Month 305	$1,553	$1,230	$323	$76,182
Month 306	$1,553	$1,235	$317	$74,947
Month 307	$1,553	$1,240	$312	$73,706
Month 308	$1,553	$1,246	$307	$72,460
Month 309	$1,553	$1,251	$302	$71,210
Month 310	$1,553	$1,256	$297	$69,954
Month 311	$1,553	$1,261	$291	$68,692
Month 312	$1,553	$1,267	$286	$67,426
Month 313	$1,553	$1,272	$281	$66,154
Month 314	$1,553	$1,277	$276	$64,877
Month 315	$1,553	$1,282	$270	$63,594
Month 316	$1,553	$1,288	$265	$62,306
Month 317	$1,553	$1,293	$260	$61,013
Month 318	$1,553	$1,299	$254	$59,715
Month 319	$1,553	$1,304	$249	$58,411
Month 320	$1,553	$1,309	$243	$57,101
Month 321	$1,553	$1,315	$238	$55,787
Month 322	$1,553	$1,320	$232	$54,466
Month 323	$1,553	$1,326	$227	$53,140
Month 324	$1,553	$1,331	$221	$51,809
Month 325	$1,553	$1,337	$216	$50,472
Month 326	$1,553	$1,342	$210	$49,130
Month 327	$1,553	$1,348	$205	$47,782
Month 328	$1,553	$1,354	$199	$46,428
Month 329	$1,553	$1,359	$193	$45,069
Month 330	$1,553	$1,365	$188	$43,704
Month 331	$1,553	$1,371	$182	$42,333
Month 332	$1,553	$1,376	$176	$40,957
Month 333	$1,553	$1,382	$171	$39,575
Month 334	$1,553	$1,388	$165	$38,187
Month 335	$1,553	$1,394	$159	$36,793
Month 336	$1,553	$1,399	$153	$35,394
Month 337	$1,553	$1,405	$147	$33,988
Month 338	$1,553	$1,411	$142	$32,577
Month 339	$1,553	$1,417	$136	$31,160
Month 340	$1,553	$1,423	$130	$29,737
Month 341	$1,553	$1,429	$124	$28,308
Month 342	$1,553	$1,435	$118	$26,874
Month 343	$1,553	$1,441	$112	$25,433
Month 344	$1,553	$1,447	$106	$23,986
Month 345	$1,553	$1,453	$100	$22,533
Month 346	$1,553	$1,459	$94	$21,074
Month 347	$1,553	$1,465	$88	$19,609
Month 348	$1,553	$1,471	$82	$18,138
Month 349	$1,553	$1,477	$76	$16,661
Month 350	$1,553	$1,483	$69	$15,178
Month 351	$1,553	$1,490	$63	$13,688
Month 352	$1,553	$1,496	$57	$12,192
Month 353	$1,553	$1,502	$51	$10,690
Month 354	$1,553	$1,508	$45	$9,182
Month 355	$1,553	$1,515	$38	$7,668
Month 356	$1,553	$1,521	$32	$6,147
Month 357	$1,553	$1,527	$26	$4,620
Month 358	$1,553	$1,534	$19	$3,086
Month 359	$1,553	$1,540	$13	$1,546
Month 360	$1,553	$1,546	$6	$0

Guide

How to understand and use this calculator

Introduction to Mortgage Refinancing

Mortgage refinancing is the process of replacing an existing home loan with a new one, typically with different terms, a different interest rate, or a different principal balance. Refinancing is a powerful financial tool that allows homeowners to adapt their housing debt to changes in the broader economic climate, personal financial situations, or long-term financial goals.

While a mortgage is initially set up for 15, 20, or 30 years, most homeowners do not keep their original loan for its full duration. Over time, market interest rates fluctuate, home values appreciate, and borrower credit profiles improve. Any of these events can create an opportunity to refinance. By paying off the old loan with a new mortgage, you can optimize your monthly cash flow, reduce the total interest paid over the life of the loan, or extract built-up equity for other purposes.

However, refinancing is not free. It is a complete mortgage transaction, meaning it involves closing costs, appraisal fees, title insurance, and lender underwriting charges. To determine if refinancing is a sound financial decision, one must compare the monthly savings and interest reduction against the upfront closing costs to establish a clear break-even point.

How Refinance Savings are Calculated

Evaluating a refinance requires looking beyond the interest rate. A common mistake is assuming that a lower rate automatically makes refinancing a good deal. To compute the real savings, you must analyze the remaining balance, remaining months on the current loan, new monthly payment, and the cost of resetting the amortization timeline.

First, the remaining balance of the existing loan is computed based on the original loan amount, the current interest rate, and the number of months already paid. This remaining balance, plus any rolled-in closing costs, becomes the principal for the new loan.

Second, the monthly payments for both the old and new loans are calculated. The difference between these payments is your monthly cash savings:

\[ \text{Monthly Payment Change} = \text{Current Monthly Payment} - \text{New Monthly Payment} \]

Third, the total remaining cost of the current loan (payments multiplied by remaining months) is compared against the total cost of the new loan (new payments multiplied by the new term plus closing costs). The difference is your lifetime net savings:

\[ \text{Total Net Savings} = (\text{Current Payment} \times n_{\text{remaining}}) - (\text{New Payment} \times n_{\text{new}}) - \text{Closing Costs} \]

If the new term is longer than the remaining term of the old loan, you might pay lower payments each month but accrue more total interest over time due to the extended repayment period. The refinance calculator accounts for this trade-off by comparing the complete lifetime repayment schedules side-by-side.

Understanding the Closing Cost Break-Even Point

Closing costs typically range from 2% to 5% of the loan amount. For a $300,000 mortgage, this translates to $6,000 to $15,000 in upfront fees. Because you pay these fees at closing, you begin the refinanced loan in a "negative" cash position relative to your old loan.

The break-even point is the number of months it takes for your cumulative monthly savings to equal the upfront closing costs. Once you pass the break-even point, you enter the "profit phase" where the refinance represents real, realized savings. The basic formula is:

\[ \text{Break-Even Months} = \frac{\text{Closing Costs}}{\text{Monthly Payment Savings}} \]

For example, if closing costs are $6,000 and your monthly payment drops by $250, your break-even period is 24 months. If you plan to move or sell the home in less than two years, you will not recover the closing costs, and refinancing would result in a net loss. If you stay in the home for 10 years, you will save $250 per month for 96 months after breaking even, generating $24,000 in net savings.

If you roll closing costs into the loan balance, you do not pay cash upfront, but your loan balance increases. The interest charged on those rolled-in fees increases your new monthly payment and reduces your lifetime savings. In this case, the break-even is calculated by comparing the equity position over time rather than cash cashflow, which is why modeling both scenarios is critical.

The Mathematics of Loan Balance and Payment

To calculate the remaining balance of an amortizing loan, we use the formula for remaining principal:

\[ B = P \times \frac{(1 + r)^n - (1 + r)^m}{(1 + r)^n - 1} \]

Where $ B $ is the remaining balance, $ P $ is the original loan amount, $ r $ is the monthly interest rate, $ n $ is the total number of payments (original term in years × 12), and $ m $ is the number of payments already made (months paid).

To calculate the new monthly payment, the standard amortization formula is applied to the new loan amount:

\[ M = P_{\text{new}} \times \frac{r_{\text{new}} (1 + r_{\text{new}})^{n_{\text{new}}}}{(1 + r_{\text{new}})^{n_{\text{new}}} - 1} \]

Where $ M $ is the monthly payment, $ P_{\text{new}} $ is the new loan amount (including closing costs if rolled in), $ r_{\text{new}} $ is the new monthly interest rate, and $ n_{\text{new}} $ is the new loan term in months.

These formulas highlight why even a small decrease in interest rate can yield significant savings when applied to large balances, and conversely, why high closing costs can easily wipe out those gains if the rate difference is minimal.

Step-by-Step Manual Refinance Examples

Let's calculate a refinance scenario manually to clarify the math. Assume a homeowner has a $250,000 loan at 6.0% interest for 30 years. They have paid the mortgage for 60 months (5 years) and are considering refinancing to a new 30-year loan at 4.5%. Closing costs are estimated at $5,000.

Step 1: Calculate the current monthly payment. For a $250,000 loan at 6.0% (r = 0.005, n = 360):

\[ M_{\text{old}} = 250,000 \times \frac{0.005(1.005)^{360}}{(1.005)^{360} - 1} = \$1,498.88 \]

Step 2: Calculate the remaining balance after 60 months (m = 60):

\[ B = 250,000 \times \frac{(1.005)^{360} - (1.005)^{60}}{(1.005)^{360} - 1} = \$232,593.42 \]

Step 3: Calculate the remaining cost of the old loan. There are 300 months remaining (360 - 60):

\[ \text{Remaining Cost} = \$1,498.88 \times 300 = \$449,664.00 \]

Step 4: Calculate the new payment at 4.5% interest on the remaining balance of $232,593.42 over a new 30-year term (r = 0.00375, n = 360):

\[ M_{\text{new}} = 232,593.42 \times \frac{0.00375(1.00375)^{360}}{(1.00375)^{360} - 1} = \$1,178.51 \]

Step 5: Calculate monthly payment savings:

\[ \text{Monthly Savings} = \$1,498.88 - \$1,178.51 = \$320.37 \]

Step 6: Calculate total cost of the new loan including closing costs paid out-of-pocket:

\[ \text{Total New Cost} = (\$1,178.51 \times 360) + \$5,000 = \$424,263.60 + \$5,000 = \$429,263.60 \]

Step 7: Calculate net lifetime savings:

\[ \text{Net Savings} = \$449,664.00 - \$429,263.60 = \$20,400.40 \]

Step 8: Calculate the break-even period:

\[ \text{Break-Even Months} = \frac{\$5,000}{\$320.37} = 15.6 \text{ months} \]

In this scenario, the homeowner recovers the $5,000 closing costs in under 16 months and saves more than $20,000 over the life of the loan.

Related concepts

Amortization Schedule

A table showing each monthly payment split between principal and interest.

Break-Even Period

The number of months it takes for monthly savings to cover upfront transaction fees.

LTV Ratio

Loan-to-Value ratio compares your mortgage balance to the appraised value of the home.

Prepayment Penalty

A fee charged by some lenders if you pay off your mortgage early, including through a refinance.

FAQs

Is it worth refinancing for a 1% drop in interest rate?

Traditionally, financial advisors suggested refinancing is worth it if you can lower your rate by 1% to 2%. However, even a 0.5% or 0.75% drop can make financial sense if you have a large loan balance, low closing costs, or plan to stay in the home for a long time. Calculating the break-even period is the most reliable way to decide.

What are typical closing costs when refinancing a mortgage?

Refinance closing costs generally range from 2% to 5% of the loan amount. They include lender origination fees, appraisal fees, title search and insurance, recording fees, credit report fees, and escrow deposits for taxes and insurance. You should request a Loan Estimate from multiple lenders to compare fees.

What is a "no-closing-cost" refinance?

A "no-closing-cost" refinance does not mean the fees are waived. Instead, the lender either rolls the closing costs into your new principal balance or charges a slightly higher interest rate to cover the fees. While this avoids paying cash upfront, it increases your monthly payments and reduces your lifetime interest savings.

Does refinancing reset my mortgage term?

By default, yes, refinancing replaces your current loan with a brand new loan that has a new term (such as 30 years). If you have already paid off 10 years of a 30-year mortgage, refinancing into a new 30-year term resets your clock, meaning you will be paying your mortgage for a total of 40 years. You can avoid this by refinancing into a shorter term (like a 15-year or 20-year loan) or asking your lender for a custom term.

How does rolling closing costs into the loan affect break-even?

When you roll closing costs into the loan, your new loan amount increases by the amount of the fees. This raises your monthly payment and interest charges. While your upfront cash output is zero, it takes longer to reach break-even in terms of home equity because you are starting with a higher debt balance.

How soon can I refinance after getting my original mortgage?

Lenders typically require a "seasoning period" of 6 months before you can refinance a conventional or government-backed loan with the same lender. However, you can often refinance with a different lender immediately, provided there are no prepayment penalties on your current mortgage.

How does refinancing affect my credit score?

Applying for a refinance triggers a hard credit inquiry, which may temporarily lower your credit score by a few points. Additionally, closing your old mortgage account and opening a new one reduces the average age of your credit history. However, making consistent on-time payments on the new loan will rebuild your credit quickly.

What is a cash-out refinance?

A cash-out refinance replaces your current mortgage with a larger loan, allowing you to take the difference in cash. This is a common way to access built-up home equity to fund home renovations, consolidate high-interest debt, or cover large expenses. Cash-out loans usually carry slightly higher interest rates and stricter underwriting requirements.

Formula

Refinance Savings Formula

Net Savings = (Current Payment × Remaining Months) - (New Payment × Refinance Term Months) - Upfront Fees

Step by step

How the calculation works

1Find your current mortgage payment, original interest rate, and original term.
2Specify the number of months already paid on the existing mortgage.
3Calculate the remaining principal balance using the amortizing remaining balance formula.
4Enter the interest rate and term for the proposed new mortgage.
5Determine closing costs and choose if you want to roll them into the new mortgage.
6Calculate the new payment and subtract it from the old payment to find monthly cash flow change.
7Compare the total cost of the new loan plus fees to the remaining payments of the old loan to compute net savings.
8Divide the closing costs by the monthly savings to find your break-even period in months.

Example

Example Refinance Scenario

Related guides

Learn more about this calculation

Guide

Mortgage Amortization: How Each Payment Splits Principal and Interest

Understand how mortgage amortization works, why early payments are mostly interest, how extra payments reduce total cost, and how to read an amortization schedule.

Guide

Home Affordability: How Much House Can You Really Afford?

Calculate how much home you can afford based on income, debt, down payment, interest rates, and ongoing costs like taxes, insurance, and maintenance.