Refinance Calculator
Compare your current mortgage with a refinance: new payment, break-even month and lifetime savings after closing costs.
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Currency: Amounts are calculated in the currency you select; this site does not convert between currencies and does not use live exchange rates.
What this tool does
Refinancing replaces your mortgage with a new one, and the sales pitch always leads with the lower monthly payment. This calculator shows the three numbers that decide whether it is actually a good deal: the monthly saving, the break-even month when cumulative savings overtake the closing costs, and the lifetime saving after subtracting those costs and accounting for any term reset. The term reset is the trap it is built to expose — refinancing a loan with 27 years left into a fresh 30-year term cuts the payment even at the same rate, yet can add tens of thousands in lifetime interest.
How to use the Refinance Calculator
- Enter your current balance, rate and the months remaining on the loan.
- Enter the new rate and new term being offered.
- Enter the total closing costs of the refinance (lender fees, title, appraisal — not prepaid escrows).
- Check break-even first: you must stay in the loan longer than that to come out ahead.
- Then check lifetime saving after costs — if it is negative, the lower payment is costing you money.
Formula
Break-even months = Closing costs ÷ (Old payment − New payment); Lifetime saving = Old remaining interest − New total interest − Closing costs
- Old/New payment
- Level payments from the amortization formula on the same balance
- Old remaining interest
- Old payment × months remaining − balance
- New total interest
- New payment × new term − balance
Both loans are modeled on today's balance with no cash-out and no points bought or lender credits; add points to closing costs to model a buydown. Taxes, insurance and HOA are unchanged by a refinance and are excluded.
Worked example
A $320,000 balance at 7.5% with 330 months left costs $2,293.46 a month. Refinancing to 6% over a fresh 360 months drops the payment to $1,918.56 — saving $374.90 a month, breaking even on $6,000 of closing costs in 17 months, and saving about $60,159 of lifetime interest even after the term reset and costs.
Inputs
- Current loan balance$320000
- Current interest rate (%)7.5 %
- Months left on current loan330
- New interest rate (%)6 %
- New loan term (months)360
- Closing costs$6000
Result
- New monthly payment$1,918.56
- Current monthly payment$2,293.46
- Monthly saving$374.90
- Break-even (months)17
- Lifetime interest — current loan$436,841.15
- Lifetime interest — new loan$370,682.20
- Lifetime saving after closing costs$60,158.94
Results explained
- New monthly payment
- Principal & interest on the refinanced loan.
- Monthly saving
- Current payment minus new payment; negative means the new loan costs more each month.
- Break-even (months)
- Months of savings needed to repay the closing costs; 0 when there is no monthly saving.
- Lifetime saving after closing costs
- Old remaining interest minus new interest minus closing costs — the bottom line of the refinance.
Frequently asked questions
Two tests: you must keep the new loan past the break-even month (closing costs ÷ monthly saving), and the lifetime saving after costs should be positive. Passing the first test but failing the second usually means the term reset is quietly costing you interest.
Most advisers look for break-even inside 24–36 months, and well inside how long you realistically expect to keep the home and loan. In the example it is 17 months, which clears the bar comfortably.
If the new term restarts the clock — 330 months remaining replaced by 360 — you make 30 extra payments. At small rate differences the extra years of interest can exceed the rate saving.
Rolling them in raises the new balance and interest. This tool treats costs as paid in cash; to model rolling them in, add them to the balance and set closing costs to zero — the break-even then shows as immediate but lifetime interest rises.
The old '1% rule' is obsolete with today's closing-cost competition. Run your real numbers: on a $320,000 balance even a 0.5% drop saves about $100 a month, which breaks even on $6,000 of costs in roughly five years.
If the new loan is conventional and your loan-to-value is above 80%, PMI applies again until you reach 80% — factor that premium into the comparison or use the PITI calculator on the new loan.