Refinance Calculator
Compare your current mortgage to a refinance at a new rate and term. This calculator shows your monthly savings, the month you break even on costs, how much total interest you save over the life of the loan, and an optional cash-out and points breakdown. Closing costs can be paid up front or rolled into the new balance.
Formula
Worked example
A $280,000 balance at 6.75% over 27 years costs about $1,880/mo. Refinancing the same balance at 5.5% over 30 years costs about $1,590/mo, a saving of ~$290/mo. With $4,000 in closing costs paid in cash, break-even is ceil(4,000 ÷ 290) = 14 months, and the lower rate trims tens of thousands in interest even after resetting the term.
How the refinance break-even is calculated
Each payment uses the standard amortization formula, where P is the loan balance, r is the monthly rate (annual rate divided by twelve), and n is the number of months. The calculator finds your current payment from the balance, current rate and years remaining, then a new payment from the new balance at the refinanced rate and term. Monthly savings is the difference. Break-even is the cash you pay at closing divided by that monthly saving, rounded up to a whole month. If you roll the costs into the loan there is no cash to recover, so the cash break-even is immediate, but you then pay interest on those financed costs over the life of the loan.
Points, cash-out and rolling in the costs
Discount points are an up-front fee equal to a percent of the new balance that buys down your rate, so one point on a $280,000 loan is $2,800. A cash-out refinance adds the cash you take to the new balance, which raises both the payment and the total interest because you are borrowing more. You can choose to pay the closing costs and points in cash at the table or roll them into the new loan. Rolling them in keeps cash in your pocket today but increases the balance you finance, so the calculator adds them to the new principal and recomputes the payment, the total interest and the lifetime saving accordingly.
Why total interest matters as much as the rate
A lower rate alone does not guarantee a refinance is worthwhile. The calculator reports the interest still owed on your current loan and the total interest on the new loan, then the lifetime interest saved between them. Refinancing a 27-year balance into a fresh 30-year loan lowers the payment partly by spreading the same debt over more months, which can free up cash flow but add interest even when the rate drops. Look at the break-even month, the lifetime interest saved and the net lifetime saving together, and consider matching the new term to the years you have left rather than restarting the clock.
Typical refinance break-even ranges
| Break-even | Interpretation | Outlook |
|---|---|---|
| Under 2 years | Costs recovered quickly | Low |
| 2 to 4 years | Worthwhile if you stay put | Moderate |
| Over 4 years | Only pays off if you keep the loan a long time | High |
A rough guide, your own numbers depend on rate, balance, points and closing costs.
Frequently asked questions
What is the break-even point on a refinance?
It is the number of months it takes for your monthly savings to add up to the cash you pay at closing. Divide the up-front cost by the monthly savings and round up. If you keep the loan past that point, the refinance has paid for itself. Rolling the costs into the loan removes the cash break-even but adds interest instead.
Should I pay points or roll closing costs into the loan?
Points are an up-front fee that lowers your rate, so they help most if you keep the loan long enough to recover them. Rolling closing costs into the balance keeps cash in your pocket now but means you pay interest on those costs for the full term. This calculator lets you toggle both so you can compare the monthly payment, the break-even month and the lifetime interest in each case.
Does a lower interest rate always save money?
Not necessarily. Closing costs, points and a longer new term can offset a lower rate. A smaller monthly payment achieved by stretching the loan over more years can still mean more total interest. Check the break-even point and the lifetime interest saved, not just the rate.
How does a cash-out refinance change the numbers?
The cash you take out is added to the new loan balance, so you borrow more, pay a higher monthly payment and accrue more interest over the term. Enter the cash-out amount and the calculator folds it into the new balance, the payment and the total interest so you can see the true cost of pulling out equity.