Refinance Calculator
A refinance is sold on the monthly payment. This works out the other numbers: what it costs to get there, how long before the saving repays that cost, and whether the whole thing still comes out ahead over the years you plan to stay.
On this page
The two questions a refinance turns on
The first is easy: does the payment go down. The second is the one that decides it: does the total cost go down, over the period you will actually own the house.
These can disagree sharply, and the disagreement is not an edge case. Replacing a mortgage with 22 years left with a fresh 30-year loan lowers the payment almost regardless of the rate, because the same debt is being spread over eight more years. That is not a saving. It is a longer, cheaper-feeling loan that may cost more in total.
The calculator reports both, and says so explicitly when the payment drop is coming from the extra years rather than the better rate.
Break-even, and what it does and does not tell you
Break-even is the number of months the monthly saving takes to repay the closing costs:
break-even months = upfront cost ÷ monthly saving
It is a useful screen: if break-even is 34 months and you expect to move in two years, the decision is made. But it ignores what happens to the principal, which is why it is not the last word. A 30-year refinance pays down the balance more slowly than the 22-year loan it replaced, so you can pass the break-even test and still be worse off when you sell.
That is what the holding-period comparison is for. It counts every payment made over the years you expect to stay, subtracts the principal each loan paid down, and compares the net cost. It is the number to trust when break-even and lifetime interest point in different directions.
Keeping the term instead of restarting it
If you have 25 years left, ask for a 25-year term rather than a 30. Most lenders will write a custom term, and it removes the confounding effect entirely: the payment change then reflects the rate alone, and the comparison is clean.
You can test this here in a few seconds. Run the offer at 30 years, then run it again at your remaining term. If the second version still saves money, the refinance is genuinely a better loan. If only the first does, what you are being sold is a longer mortgage.
A worked example
A $312,000 balance at 7.125% with 25 years left costs about $2,244 a month in principal and interest. A refinance at 5.875% over a fresh 25 years drops that to about $1,988 — a saving of $256 a month against $5,800 of closing costs.
Break-even is 23 months. Over a nine-year stay the new loan costs roughly $28,000 less in net terms, and because the term is unchanged the lifetime interest falls too. This one is straightforward.
Rerun it at a 30-year term and the payment falls further, to about $1,846. Break-even improves to 15 months. But the loan now runs five years longer, lifetime interest rises by tens of thousands, and the balance nine years from now is higher than it would have been. Same rate, same costs, materially worse deal — visible only because both figures are on the page.
Rolling the costs into the loan
A "no-cost" refinance is not free; the costs are added to the balance and you pay interest on them for the life of the loan. On $5,800 rolled into a 30-year mortgage at 6%, that is roughly $6,700 of interest on the fees alone.
It can still be the right call when cash is tight or when you may refinance again soon. Tick the box and the calculator adds the costs to the new principal so the payment, the interest, and the break-even all reflect it.
What this does not cover
- Cash-out refinancing. Taking equity out changes the balance, the rate, and often the mortgage insurance. Model that as a new loan with the larger amount.
- Mortgage insurance. Refinancing can add or remove PMI depending on the loan-to-value; see the PMI calculator.
- Escrow. Property tax and insurance are unchanged by refinancing and are excluded from both sides.
- Tax treatment. Points on a refinance are generally deducted over the life of the loan rather than in the year paid. That is a question for a tax professional.
- Adjustable rates. Both loans are treated as fixed. For an adjustable offer, use the ARM calculator.
If the goal is simply to pay less interest, compare this against the extra payment calculator — prepaying costs nothing to start and carries no closing costs. See our methodology for how these tools are built and tested.
Frequently asked questions
How much does the rate need to drop to make refinancing worth it?
There is no universal threshold, and the old "one percent rule" is not one. What matters is the size of the balance, the closing costs, and how long you will stay: a quarter-point on a $700,000 balance can beat a full point on a $120,000 one.
Run your own numbers here. If break-even lands comfortably inside your expected stay and the total cost over that period falls, the size of the rate drop is beside the point.
Why is my lifetime interest higher even though the payment went down?
Because the new loan runs longer. Interest is charged for every month a balance is outstanding, so adding years adds interest even at a lower rate.
Ask the lender for a term matching what is left on your current mortgage. The payment saving will be smaller and entirely real.
Do I lose the equity I have built up?
No. Equity is the difference between what the house is worth and what you owe, and a rate-and-term refinance changes neither. The new loan pays off the old balance and nothing more.
What does change is the pace at which equity grows from here. A longer term pays down principal more slowly, which is why the calculator shows the balance remaining at the end of your holding period on both loans.
Is a no-closing-cost refinance actually free?
No. The costs are either added to the balance or paid for through a higher rate. Both are real, and both are just deferred.
It can still be sensible when cash is short or when you might refinance again before the costs are recovered. Tick the box in the form to see what rolling them in does to the payment and the interest.
Should I refinance to a 15-year mortgage?
It usually carries a lower rate and always carries a much higher payment. Total interest falls a great deal, which is the attraction.
The caution is that the higher payment is a permanent obligation, whereas paying extra on a 30-year loan achieves a similar result while leaving you the option to stop. Compare the 15-year offer here against the same money used as an extra payment on your current loan.
How accurate is the break-even month?
It is exact for the figures entered. Its accuracy depends entirely on the closing costs being right, which is why the Loan Estimate matters — section D of that form is the number to type in, not the lender's verbal summary.
It also assumes you keep the loan until break-even. Refinancing again before then resets the clock and forfeits the recovery.
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This calculator is provided for general educational and estimation purposes only and is not financial or lending advice. It is not a loan offer, a rate quote, or an indication of approval. Compare real Loan Estimates from lenders, which disclose the APR and every fee on a standard form.