Mortgage Refinance Calculator

A mortgage refinance calculator answers one question with two numbers: the closing costs you pay upfront and the monthly savings you get back. Put $7,500 in costs against $311 a month in savings and you get 24 — the number of months it takes the new loan to cancel out the old one. Stay past month 24 and you're ahead. Sell in month 18 and you just paid $7,500 to lose money. Everything else about a refinance — the rate, the term, the lender's pitch — is noise next to that one comparison.

Break-Even Is the Only Number That Matters

Forget the rate cut for a second. The number that decides whether you should refinance is your break-even point — the month your accumulated savings finally equal what you spent to get them.

The formula is simple: break-even months = closing costs ÷ monthly savings. Spend $6,000 and save $300 a month? You break even in 20 months. The CFPB frames the refinance decision around this exact tradeoff, because the math doesn't care how good the new rate looks. If you'll move, sell, or refinance again before break-even, even a great rate costs you money.

This is why the same refinance can be brilliant for one homeowner and a mistake for their neighbor. A 24-month break-even is a no-brainer if you're staying 15 more years. It's a trap if you list the house next spring. And if part of your goal is pulling equity out, run a cash-out refinance calculator first — adding cash re-rates your entire balance, which changes the break-even math entirely.

How the Refinance Math Actually Works

A refinance replaces your old loan with a new one. The calculator rebuilds your current payment from the balance, rate, and years left, then computes a fresh payment on the new loan using the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the balance, r is the monthly rate, and n is the number of payments.

Here's the part lenders gloss over. Your monthly savings come from two levers, and only one of them is free. A lower rate genuinely saves money. A longer term lowers the payment too — but by spreading the debt over more years, which can add interest even at a lower rate. When you see a big monthly drop, check where it came from: the rate, or resetting a 23-year loan back to 30. The first is a real win; the second is a cash-flow trade. Our mortgage amortization calculator shows exactly how a fresh schedule front-loads interest all over again.

Worked Example: Trading 6.75% for 5.5%

Take a homeowner with a $300,000 balance, 27 years left, at 6.75%. Their current payment is $2,015 a month. Rates have dropped and they're quoted 5.5% on a new 30-year loan with $7,500 in closing costs. Here's the full picture:

• Current payment: $2,015/mo at 6.75%
• New payment: $1,703/mo at 5.5% (30-year)
• Monthly savings: $312
• Break-even: $7,500 ÷ $312 ≈ 24 months

Stay more than two years and they win. Planning to stay seven? That's 84 months of $312 savings minus the $7,500 cost — a net gain of about $18,700 by the time they'd sell. The catch hides in the lifetime numbers: the old loan had $352,796 of interest left over 27 years; the new 30-year carries $313,212. They come out ahead on interest here only because the rate drop is big enough to overcome three extra years of payments. Shave a smaller amount off the rate and that relationship flips fast. You can sanity-check any new payment with our standard mortgage calculator before you ever talk to a lender.

How Far Your Rate Has to Drop

The old "refinance for 1% or more" rule is a relic. What matters is how the rate drop interacts with your balance and your closing costs. Here's the break-even for that same $300,000 balance (27 years left at 6.75%) refinanced into a new 30-year loan with $7,500 in costs:

A quarter-point cut takes more than five years to pay for itself — too long for most owners. Past three-quarters of a point, break-even drops under three years and the decision gets easy. The bigger your balance, the smaller the rate cut needs to be, because each tenth of a point moves a larger dollar amount. Your closing costs are the other half of this ratio — trim them and every rate cut breaks even sooner.

Should You Reset the Clock to 30 Years?

This is where most refinances quietly leak money. Refinancing a loan with 22 years left into a fresh 30-year drops the payment two ways — lower rate, longer term — so the monthly savings look huge. But you just added eight years of payments and restarted amortization at the interest-heavy beginning.

A cleaner move is to match the new term to your remaining years, or go shorter. Refinancing that $300,000 balance into a 15-year at 5.5% runs about $2,451 a month — $436 more than the current payment — but erases roughly $140,000 in interest versus the 30-year reset. Decide by your goal:

• Choose a longer term if cash flow is tight and you need the monthly relief more than the interest savings.
• Choose a shorter term if you can absorb the payment and want to be debt-free faster with far less total interest.
• Keep a 30-year and pay extra if you want flexibility — you get the low required payment but can attack principal whenever cash allows.

The "No-Closing-Cost" Refinance Trap

No lender works for free. A "no-closing-cost" refinance just hides the $7,500 somewhere — either folded into your balance (so you pay interest on it for decades) or bought back with a higher rate (often 0.25% to 0.5% more). Both can make sense if you'll move soon, since you skip the upfront hit before break-even would have arrived anyway.

Run it both ways with the "roll closing costs into the new loan" toggle above. Rolling $7,500 into a $300,000 balance at 5.5% adds about $43 a month and nearly $8,000 in extra interest over 30 years — so the "free" refinance isn't free, it's financed. The higher-rate version is usually worse on a long hold and better on a short one. There's no universal answer; there's only your break-even.

Mistakes That Erase Your Refinance Savings

• Refinancing late in the loan. Ten years into a 30-year, most of your payment finally goes to principal. Resetting to a new 30-year throws you back into the interest-heavy years — you can pay more total interest even at a lower rate. A shorter new term avoids it.
• Ignoring break-even against your timeline.A 40-month break-even is worthless if you'll relocate in three years. That's $6,000 spent to save nothing.
• Triggering PMI again. If your equity has slipped under 20%, a refinance can add private mortgage insurance — $100 to $300 a month that can wipe out the rate savings entirely. Check your loan-to-value with our home equity calculator and confirm the premium with the PMI calculator before you apply.
• Chasing the rate, not the total cost. A lender can advertise a low rate and bury it in points and fees. Compare total closing costs on each Loan Estimate, not just the headline rate.

When Refinancing Is the Wrong Move

Refinancing isn't always the answer, and a good calculator should talk you out of it as often as into it. Skip the refinance when:

• You'll move before break-even. The single most common reason a refinance backfires. If you might sell within the break-even window, the savings never arrive.
• The rate cut is under half a point on a small balance. On a $120,000 balance, a 0.5% cut saves around $35 a month — a $6,000 cost would take over 14 years to recover.
• You'd trade a fixed rate for a riskier one to chase a lower payment. An adjustable-rate loan can undercut a fixed rate at first, but the payment can jump later — only worth it if you're confident you'll be gone before the adjustment.
• Your credit dropped since the original loan. A lower score can mean a higher rate than you have now, even in a falling-rate market.

One last move before you apply: pull a written Loan Estimate from at least three lenders on the same day. Per Freddie Mac's rate survey, the spread between lenders on identical loans routinely runs a quarter point or more — which can pull your break-even forward by a year on its own.