Mortgage Refinance Calculator
Compare your current mortgage payment to a new lower-rate payment and calculate your monthly savings. Use it when interest rates drop to determine whether refinancing makes financial sense after closing costs.
About this calculator
Refinancing saves money by replacing a higher-rate mortgage with a lower-rate one. The monthly savings equals the difference between the two fully amortized payments, each calculated using the standard formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the current loan balance, r is the monthly interest rate (annual rate ÷ 12), and n is remaining term in months. Monthly Savings = M(current rate) − M(new rate). To determine whether refinancing is worthwhile, divide total closing costs by the monthly savings to find the break-even month. If you plan to stay in the home beyond that point, refinancing generates net savings. A lower rate does not always win—a longer new term can increase total interest paid even while reducing monthly payments.
How to use
You owe $280,000 at 7.5% with 25 years remaining. A lender offers 6.5%. Monthly rate (current) = 0.075/12 = 0.00625; n = 300. M(current) = $280,000 × [0.00625 × (1.00625)³⁰⁰] / [(1.00625)³⁰⁰ − 1] ≈ $2,062. M(new) at 6.5%: r = 0.005417; M ≈ $1,880. Monthly savings = $2,062 − $1,880 = $182. With $5,000 in closing costs, break-even = $5,000 ÷ $182 ≈ 27 months. If you stay beyond 27 months, refinancing saves you money.
Frequently asked questions
How do I calculate the break-even point on a mortgage refinance?
The break-even point is the number of months it takes for cumulative monthly savings to recover the upfront closing costs. Divide total closing costs (origination fees, appraisal, title, escrow) by your monthly payment savings after refinancing. For example, $6,000 in closing costs divided by $200/month in savings equals a 30-month break-even. If you plan to sell or pay off the mortgage before that point, refinancing will cost you more than it saves. The break-even analysis is the single most important calculation in any refinance decision.
What closing costs should I expect when refinancing a mortgage?
Typical refinance closing costs run 2–5% of the loan balance and include loan origination fees (0.5–1%), appraisal ($400–$700), title search and insurance ($500–$1,500), escrow and settlement fees ($800–$1,200), recording fees ($50–$200), and prepaid items like homeowners insurance and property tax escrow. Some lenders offer no-closing-cost refinances, which roll the costs into a slightly higher rate or add them to the loan balance—these can make sense if you plan to sell within a few years. Always request a Loan Estimate to compare total costs across lenders.
When does it make sense to refinance even with a small rate reduction?
Even a 0.5% rate reduction can be worthwhile if your loan balance is large and your remaining term is long, because the absolute dollar savings per month are significant. A $400,000 balance benefits more from a 0.5% drop than a $100,000 balance with the same rate change. It also makes sense to refinance to switch from an adjustable-rate mortgage to a fixed rate for payment certainty, or to eliminate PMI if your equity has grown. Conversely, if you have fewer than 5–7 years left on your loan, refinancing into a new 30-year term restarts amortization and likely increases total interest paid even with a lower rate.