Mortgage Refinance Calculator
Calculates your monthly payment savings from refinancing by comparing your current mortgage payment to the projected new payment at a lower rate. Use it to determine whether a refinance makes financial sense given your closing costs.
About this calculator
Refinancing replaces your existing mortgage with a new loan, ideally at a lower interest rate. This calculator computes the monthly payment for both your current loan and the proposed new loan using the standard amortization formula: M = P × r / (1 − (1+r)^(−n)), where P is the current outstanding balance, r is the monthly interest rate, and n is the remaining term in months. Monthly savings = currentPayment − newPayment. To find the break-even point, divide your total refinancing closing costs by the monthly savings: Break-Even Months = closingCosts / monthlySavings. Refinancing is financially beneficial only if you plan to keep the loan longer than the break-even period. Extending the loan term while refinancing can lower payments further but resets amortization and increases total lifetime interest paid.
How to use
Current balance: $280,000. Current rate: 7.5%. New rate: 6.0%. Remaining term: 25 years. Closing costs: $4,500. Current monthly payment: r = 0.075/12 = 0.00625, n = 300. M_current = $280,000 × 0.00625 / (1 − (1.00625)^(−300)) = $1,750 / (1 − 0.1563) = $1,750 / 0.8437 ≈ $2,075. New payment: r = 0.06/12 = 0.005, n = 300. M_new = $280,000 × 0.005 / (1 − (1.005)^(−300)) = $1,400 / (1 − 0.2233) = $1,400 / 0.7767 ≈ $1,802. Monthly savings = $2,075 − $1,802 = $273. Break-even = $4,500 / $273 ≈ 16.5 months.
Frequently asked questions
When does it make sense to refinance your mortgage?
Refinancing typically makes financial sense when you can lower your interest rate by at least 0.5–1 percentage point, you plan to stay in the home long enough to pass the break-even point, and the closing costs are not so high that they offset the savings. The break-even calculation in this calculator is the key diagnostic: if closing costs divide into monthly savings within 24 months and you expect to stay at least that long, refinancing is generally worthwhile. Other valid reasons to refinance include switching from an adjustable-rate to a fixed-rate mortgage for payment certainty, or shortening the loan term to pay off your home faster.
How do refinancing closing costs affect whether a refinance is worth it?
Closing costs for a refinance typically run 2–5% of the loan balance, covering appraisal fees, title search, origination fees, and other lender charges. These costs reset the break-even clock, meaning you need to hold the refinanced loan long enough for accumulated monthly savings to exceed what you paid upfront. On a $300,000 loan, 3% closing costs equals $9,000 — at $200/month in savings, that's a 45-month break-even. Some lenders offer 'no-closing-cost' refinances that roll fees into the loan balance or rate, which lowers the break-even time but increases total interest paid. Always compare the all-in cost over your expected remaining time in the home.
Does refinancing restart my mortgage amortization and how does that affect total interest paid?
Yes — when you refinance, your new loan starts a fresh amortization schedule, which means early payments are again heavily weighted toward interest rather than principal. If you have 20 years left on a 30-year mortgage and refinance into a new 30-year loan, you extend your payoff date by 10 years and will pay interest on a large balance for a longer period, potentially negating the monthly savings in total dollar terms. To avoid this, consider refinancing into a loan term that matches your remaining term, or making extra principal payments on the new loan. This calculator's break-even analysis focuses on monthly cash flow savings; always also model total lifetime interest to get the complete picture.