How to use the mortgage refinance calculator
- Enter your current balance, rate and months remaining.
- Enter the new rate and term from a lender quote, plus estimated closing costs and any discount points.
- Choose whether costs are paid upfront or rolled into the new loan, and add any cash-out amount.
- Review the monthly change, the break-even month, the lifetime comparison and the cumulative savings chart.
Worked example
$300,000 at 7.5% with 336 months left, refinancing to 6.0% for 30 years with $6,000 costs paid upfront
The current payment is $2,138.60 and the new payment is $1,798.65, a monthly saving of $339.95. The $6,000 of costs are recovered after 18 months ($6,000 ÷ $339.95 = 17.6, rounded up). Over the life of both loans, the current loan still costs $418,572.89 in interest against $347,515.44 on the new one, and refinancing costs $65,057.45 less overall even though the new term is two years longer.
How it works
Both loans are amortized with the same engine. Monthly savings = current payment − new payment. Break-even months = upfront costs ÷ monthly savings (rounded up). Lifetime savings compare the total remaining payments on the current loan with the total payments on the new loan plus upfront costs, minus any cash received. The chart adds up the monthly payment difference over time, starting from minus the upfront costs.
Assumptions
- Points are a percentage of the new loan amount before costs are rolled in.
- Rolled-in costs increase the new loan amount and are repaid with interest.
- Only principal and interest are compared. No tax effects are modelled.
Frequently asked questions
What does break-even mean?
The number of months of lower payments needed to recover what you paid upfront to refinance. If you expect to sell or refinance again before then, refinancing may cost more than it saves.
Why can a lower payment cost more overall?
Extending the term (for example, restarting a 30-year loan when you have 25 years left) spreads the balance over more payments, which can increase total interest even at a lower rate.
Should I roll closing costs into the loan?
Rolling costs in means nothing is paid upfront, so break-even is immediate on paper, but you pay interest on those costs for the life of the loan. Compare the lifetime figure both ways.
What are discount points?
Upfront fees, each usually 1% of the loan amount, paid to lower the interest rate. Enter them as a percentage and the calculator adds them to your costs.
Limitations
- Does not model adjustable-rate loans or mortgage insurance changes.
- Assumes you keep the new loan to the end of its term for the lifetime comparison.