Refinance Calculator
Determine your refinancing break-even point and savings instantly
Quick Navigation
What is a Refinance Calculator?
A refinance calculator is a financial tool that helps you determine whether refinancing your mortgage makes financial sense. It compares your current mortgage terms with a new refinanced mortgage, calculating monthly savings, total interest savings, and most importantly, the break-even point—the number of months it takes for your monthly savings to cover the costs of refinancing.
Refinancing your mortgage is a major financial decision that comes with upfront costs (closing costs, appraisals, origination fees, etc.) but can result in significant long-term savings if you stay in your home long enough to reach the break-even point. A refinance calculator removes the guesswork, allowing you to see exactly how long refinancing will take to pay for itself and whether it aligns with your plans to stay in your home.
Why Refinancing Matters
Refinancing allows you to take advantage of lower interest rates, change your loan term, switch from variable to fixed rates, or tap into home equity for cash. However, refinancing comes with costs that must be recouped through monthly savings before you come out ahead. Understanding your break-even point is essential to making an informed decision.
Refinance Calculation Formulas
Understanding the formulas behind refinance calculations helps you verify results and make informed decisions about your refinancing opportunity.
Break-Even Point Formula
The break-even point is the most critical calculation. It determines how many months until your monthly savings equal your refinancing costs:
Break-Even Point Formula:
Break-Even Point (months) = Total Refinancing Costs / Monthly Savings
Where:
- Total Refinancing Costs = All upfront fees and closing costs
- Monthly Savings = (Current Monthly Payment) - (New Monthly Payment)
New Monthly Payment Calculation
To calculate your new monthly mortgage payment, use the standard amortization formula:
Monthly Payment Formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- M = Monthly payment (principal and interest)
- P = Principal loan amount (new refinanced amount)
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
Total Interest Calculation
Compare total interest between your current and new mortgages:
Total Interest Formula:
Total Interest = (Monthly Payment × Number of Payments) - Principal
Interest Savings:
Interest Savings = Current Total Interest - New Total Interest
Remaining Balance Calculation
If you've been paying on your current mortgage, calculate your remaining balance:
Remaining Balance Formula:
B = P × [((1+r)^n - (1+r)^p) / ((1+r)^n - 1)]
Where:
- B = Remaining balance
- P = Original principal
- r = Monthly interest rate
- n = Original total number of payments
- p = Number of payments already made
Practical Example Calculation
Let's work through a complete refinance scenario:
Current Mortgage Information:
- Remaining Balance = $250,000
- Remaining Term = 25 years (300 months)
- Current Interest Rate = 5%
- Current Monthly Payment = $1,409.64
Refinance Terms:
- New Loan Amount = $250,000
- New Term = 25 years (300 months)
- New Interest Rate = 3.5%
- Closing Costs = $5,000
New Monthly Payment Calculation:
- Monthly Interest Rate = 3.5% ÷ 12 = 0.002917
- M = $250,000 × [0.002917(1.002917)^300] / [(1.002917)^300 - 1]
- M = $1,122.61
Monthly Savings:
- Monthly Savings = $1,409.64 - $1,122.61 = $287.03
Break-Even Point:
- Break-Even = $5,000 ÷ $287.03 = 17.4 months (approximately 17 months, 12 days)
Interest Savings Over Remaining Loan Term:
- Current Total Interest = ($1,409.64 × 300) - $250,000 = $172,892
- New Total Interest = ($1,122.61 × 300) - $250,000 = $86,783
- Interest Savings = $172,892 - $86,783 = $86,109
Interactive Refinance Calculator
Use the calculator below to instantly determine your refinance break-even point and calculate your potential savings.
Break-Even in 17 months
Refinancing makes financial sense if you stay in your home this long
Detailed Comparison
| Metric | Current Mortgage | Refinanced Mortgage | Difference |
|---|---|---|---|
| Interest Rate | 5.0% | 3.5% | -1.5% |
| Monthly Payment | $1,410 | $1,123 | -$287 |
| Remaining Term | 25 years | 25 years | — |
| Total Interest Paid | $172,892 | $86,783 | -$86,109 |
| Total Cost to Close | $0 | $5,000 | -$5,000 |
📊 Break-Even Analysis
Break-Even Point: 17.4 months
Break-Even Date: May 2026
✓ Break-even point is reasonable (under 48 months)
💰 Long-Term Savings (Remaining Loan)
Net Savings: $81,109
After subtracting refinancing costs from interest savings
If you stay in your home for the entire remaining term, refinancing saves you $81,109.
⚠️ Important Consideration
If you plan to move or pay off the home before reaching the break-even point, refinancing may not be financially beneficial. Always verify rates and terms with actual lenders before committing.
How This Calculator Works
This refinance calculator uses industry-standard formulas to determine your break-even point and calculate refinancing benefits accurately.
Calculation Process
Step 1: Calculate Current Payment - Uses the current balance, rate, and remaining term to determine your current monthly payment.
Step 2: Calculate New Payment - Uses the new rate, new term, and balance (plus cash-out if applicable) to calculate your new monthly payment.
Step 3: Calculate Monthly Savings - Subtracts the new payment from the current payment to determine monthly savings.
Step 4: Calculate Break-Even Point - Divides total refinancing costs by monthly savings to determine the break-even point in months.
Step 5: Calculate Interest Comparison - Computes total interest under both current and new scenarios, then calculates savings.
Step 6: Display Results - Shows break-even point, monthly savings, interest savings, and complete comparison analysis.
Key Calculations Explained
- Monthly Payment: Uses standard amortization formula with principal, rate, and term
- Break-Even Point: Months needed for accumulated monthly savings to equal refinancing costs
- Total Interest: Sum of all interest paid over the life of the loan
- Interest Savings: Difference between current total interest and new total interest
- Net Savings: Interest savings minus refinancing costs
Important Assumptions
- Monthly payments are made consistently throughout the loan term
- Interest rates remain fixed (not adjustable-rate mortgages)
- Refinancing costs are paid upfront at closing (not rolled into the loan)
- No additional principal payments or changes to loan terms
- Property taxes, insurance, and HOA fees are excluded (focus on principal and interest)
Uses and Benefits of a Refinance Calculator
A refinance calculator serves critical purposes for homeowners considering mortgage refinancing. It provides the financial clarity needed to make informed decisions about one of the largest financial transactions most people undertake.
Primary Uses and Applications
Understand exactly how many months until refinancing pays for itself
See how much lower your monthly payment will be with a new rate
Calculate total interest savings over the life of the loan
Evaluate different term lengths (15-year vs. 30-year, etc.)
See the impact of withdrawing home equity during refinancing
Determine if refinancing makes sense based on expected home sale date
Compare different lenders' rates and costs side-by-side
Understand whether to refinance or invest money elsewhere
Strategic Benefits
- Informed Decisions: Make refinancing decisions based on actual numbers, not estimates
- Time Clarity: Understand exactly how long to stay in your home for refinancing to make sense
- Cost Awareness: See the complete picture of refinancing costs and benefits
- Comparison Power: Evaluate multiple refinancing scenarios instantly
- Financial Confidence: Enter lender discussions with clear understanding of the numbers
How to Use This Calculator
Follow these steps to calculate your refinancing break-even point and determine if refinancing makes financial sense.
Step 1: Gather Current Mortgage Information
Collect your most recent mortgage statement to find: remaining loan balance, current interest rate, current monthly payment, and remaining years on your loan.
Step 2: Enter Current Mortgage Details
Input your remaining balance, current interest rate, and remaining loan term. The calculator will automatically compute your current monthly payment based on these inputs.
Step 3: Gather New Loan Terms from Lenders
Research refinance rates from multiple lenders. Get loan estimates showing the new interest rate and total closing costs you'd pay to refinance.
Step 4: Enter New Refinance Terms
Input the new interest rate, desired new loan term, and total refinancing costs. If you're doing a cash-out refinance (borrowing against your home equity), enter that amount.
Step 5: Click Calculate
Click "Calculate Refinance" to instantly see your break-even point, monthly savings, and complete financial comparison.
Step 6: Review Results
Check your break-even point—if it's reasonable (typically under 48 months) and you plan to stay in your home longer, refinancing could be a good decision. Review the detailed comparison to understand all impacts.
Step 7: Test Different Scenarios
Click "Clear" and test different rates or terms. See how a shorter loan term affects your payment and break-even point. This helps you find the optimal refinance scenario.
Pro Tips for Best Results
- Get Multiple Quotes: Refinancing costs vary by lender—compare offers from 3-5 lenders
- Know Your Plans: Be honest about how long you'll stay in your home—this is crucial to break-even analysis
- Consider All Costs: Closing costs typically range from 2-6% of the loan amount
- Check Your Credit: Your credit score affects the rates you'll qualify for—check before shopping
- Review Points: Some lenders offer discount points (paying upfront to lower rate)—model this in the calculator
- Think Long-Term: Even if break-even is years away, interest savings over time might still justify refinancing
- Lock Rates: Get a rate lock from lenders to lock in quoted rates while you decide
Frequently Asked Questions About Refinancing
The break-even point is the number of months it takes for your monthly savings from refinancing to equal the upfront costs (closing costs, fees, etc.). After this point, you're saving money. If you break even in 20 months and stay in your home for 30 months, you save for 10 months.
Refinancing closing costs typically range from 2-6% of your new loan amount. For a $250,000 loan, that's $5,000-$15,000. Costs include origination fees, appraisal, title search, underwriting, and other third-party services. Get a Loan Estimate from your lender for exact costs.
Yes, you can add closing costs to your new loan amount (this is called "rolling costs into the loan"). However, this means you'll pay interest on those costs over the life of the loan, increasing your total interest paid. Usually, it's better to pay costs upfront if possible.
A break-even point of 12-36 months is generally considered good. If your break-even is under 24 months and you plan to stay in your home longer, refinancing is likely wise. If break-even is 60+ months, consider whether the long-term interest savings justify it.
If you plan to move before reaching your break-even point, refinancing typically doesn't make financial sense. You'll pay closing costs but not recoup them through monthly savings before leaving. However, if a much lower rate significantly improves monthly cash flow, there could be other benefits.
A standard refinance replaces your current mortgage with a new one for the same amount (or less if you've paid it down). A cash-out refinance lets you borrow more than you owe and take the difference in cash. The extra borrowed amount increases your loan balance and monthly payment.
Refinancing causes a temporary small dip in your credit score (typically 5-10 points) due to the hard inquiry and new credit inquiry. However, it recovers within a few months. Over time, refinancing can improve your score if it lowers your credit utilization ratio or improves your payment history.
You can refinance with lower credit scores, but you'll pay higher rates. Most lenders prefer credit scores of 620+ for FHA refinances and 660+ for conventional. A lower score means you'll see smaller savings or need a longer break-even point to make refinancing worthwhile.
If you have a fixed-rate mortgage and rates go up, you keep your locked rate—that's the benefit of fixed rates. You're in a better position than borrowers who didn't refinance. However, if rates go down significantly in the future, you could consider refinancing again.
Technically, there's no limit to how many times you can refinance, but practically, it only makes sense when rates drop significantly enough to overcome closing costs again. Most advisors suggest waiting at least 12-24 months between refinances to ensure the savings justify the costs.
Source References and Official Resources
This calculator's formulas and methodologies are based on industry-standard mortgage calculations and financial practices. For authoritative information about mortgage refinancing, consult these official resources:
Official Government and Lending Resources
- Fannie Mae Selling Guide - Official standards for conventional mortgage lending
- Freddie Mac - Government-sponsored mortgage authority with lending guidelines
- U.S. Department of Housing and Urban Development (HUD) - Official mortgage and refinancing information
- Federal Trade Commission - Mortgage Shopping Guide - Official consumer protection guidance
Calculation Methodology References
- Monthly Payment Formula: M = P × [r(1+r)^n] / [(1+r)^n - 1]
- Break-Even Formula: Break-Even (months) = Total Costs / Monthly Savings
- Interest Calculation: Total Interest = (Monthly Payment × Payments) - Principal
- Remaining Balance: Uses declining balance amortization formula
Important Disclaimer
This calculator provides estimates for educational and planning purposes based on standard mortgage formulas. Results are approximate and should not be considered formal refinancing quotes or professional financial advice. Actual refinancing terms, rates, and closing costs vary significantly by lender, your credit score, loan amount, property type, and market conditions. The break-even point assumes you make all payments on time and don't move or pay off the home early. Always consult directly with multiple lenders and review actual Loan Estimates before making refinancing decisions. Different lenders may calculate payments slightly differently or offer different terms. Consult with a qualified mortgage professional or financial advisor for personalized guidance about your specific refinancing situation.