Mortgage Refinance Calculator
Estimates total interest savings from refinancing your mortgage to a lower rate over the remaining loan term. Use it when evaluating whether a rate drop justifies the cost of refinancing.
About this calculator
This calculator estimates gross interest savings using the formula: Savings = [(currentBalance × currentRate / 100 / 12) − (currentBalance × newRate / 100 / 12)] × remainingYears × 12. It calculates the difference in monthly interest charges between your current rate and the proposed new rate, then multiplies by the total number of remaining payments. Note that this is a simplified model based on the current balance only — it does not account for the full amortization of the new loan or closing costs of the refinance. To determine true break-even, divide the estimated closing costs by the monthly savings to find how many months it takes to recoup them. Refinancing typically makes financial sense if you plan to stay in the home beyond that break-even point and the rate reduction is at least 0.5–1 percentage point.
How to use
Suppose your current balance is $250,000, your current rate is 7.0%, the new rate is 5.5%, and you have 20 years remaining. Monthly interest at 7.0% = 250,000 × 0.07 / 12 = $1,458.33. Monthly interest at 5.5% = 250,000 × 0.055 / 12 = $1,145.83. Monthly savings = $1,458.33 − $1,145.83 = $312.50. Total savings = $312.50 × 20 × 12 = $312.50 × 240 = $75,000 over the remaining term. If closing costs are $5,000, break-even = $5,000 / $312.50 ≈ 16 months.
Frequently asked questions
How much lower does my interest rate need to be to make refinancing worth it?
A common guideline is that refinancing is worth considering when you can reduce your rate by at least 0.5 to 1 percentage point. However, the actual threshold depends on your loan balance and how long you plan to stay in the home. A larger balance amplifies monthly savings, making even a 0.5% reduction significant. The real test is comparing your total closing costs against your projected monthly savings to calculate the break-even timeline — if you'll stay in the home beyond that point, refinancing is likely worthwhile.
What are the typical closing costs when refinancing a mortgage?
Refinance closing costs typically range from 2% to 5% of the loan amount, similar to the original purchase. Common fees include a loan origination fee, home appraisal ($400–$700), title search and insurance, recording fees, and prepaid interest. On a $250,000 loan, you might expect $5,000–$12,500 in closing costs. Some lenders offer no-closing-cost refinances, where costs are either rolled into the loan balance or offset by a slightly higher interest rate, which reduces upfront outlay but increases long-term cost.
When does it not make sense to refinance even if interest rates have dropped?
Refinancing may not make sense if you plan to sell or move before reaching the break-even point, since closing costs will exceed your accumulated savings. It is also less attractive if you are far into your loan term, because refinancing restarts the amortization clock and front-loads interest payments again. If your credit score has dropped since the original loan, you may not qualify for a better rate. Finally, if your current loan has a prepayment penalty, that fee must be factored into the total cost analysis.