Mortgage Refinance Calculator
Compare your current mortgage payment against a new loan's payment to find your monthly savings and break-even point. Ideal for homeowners considering a lower interest rate or a shorter loan term.
About this calculator
Refinancing replaces your existing mortgage with a new one, ideally at a lower interest rate. The monthly payment for each loan is calculated with the standard amortization formula: M = P × (r × (1+r)^n) / ((1+r)^n − 1), where P is the outstanding balance, r is the monthly rate, and n is the remaining number of payments. This calculator computes both monthly payments — one at your current rate and one at the new rate — and subtracts them to find monthly savings. Dividing the total refinancing closing costs by that monthly saving gives the break-even period: the number of months you must stay in the home for refinancing to pay off. If you plan to stay longer than the break-even period, refinancing is financially beneficial.
How to use
Say your remaining balance is $250,000, your current rate is 7.0%, your new rate is 5.5%, and 25 years remain. Current monthly payment = 250,000 × (0.005833 × (1.005833)^300) / ((1.005833)^300 − 1) ≈ $1,767. New monthly payment = 250,000 × (0.004583 × (1.004583)^300) / ((1.004583)^300 − 1) ≈ $1,530. Monthly savings = $1,767 − $1,530 = $237. If closing costs are $4,500, break-even = 4,500 ÷ 237 ≈ 19 months. Stay longer than 19 months and you come out ahead.
Frequently asked questions
How do I calculate whether refinancing my mortgage will save me money?
Start by computing your current monthly payment and the proposed new payment using the amortization formula for each rate. Subtract the new payment from the current payment to get monthly savings. Then divide the total closing costs of the refinance by that monthly saving to find the break-even point in months. If you plan to stay in the home longer than that break-even period, refinancing saves you money overall. If you might move sooner, you could lose money even with a lower rate.
What is a good interest rate drop to justify refinancing a mortgage?
A common rule of thumb is that a rate reduction of at least 1 percentage point is worth pursuing, but the right threshold depends on your remaining balance and how long you plan to stay. On a large balance like $400,000, even a 0.5% drop can generate substantial monthly savings that recoup closing costs quickly. On a smaller balance or with only a few years remaining, the math may not favor refinancing even with a 1% drop. Always calculate your personal break-even period before deciding.
Does refinancing reset my mortgage amortization schedule back to 30 years?
Only if you choose a new 30-year term. Many homeowners refinance into a 20- or 15-year loan to keep their payoff date similar while securing a lower rate. Resetting to 30 years lowers your monthly payment the most but restarts the amortization clock, meaning a larger share of early payments goes to interest again. If your goal is to minimize total interest paid, refinancing into a shorter term at a lower rate is usually the most effective strategy, though the monthly payment will be higher.