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.
Last updated: May 2026
About this calculator
This calculator estimates your net monthly savings from refinancing. It amortizes the remaining balance at both the current and the new rate over the remaining term using the standard mortgage payment formula M = P × r / (1 − (1 + r)^−n), where r is the monthly interest rate and n is the number of remaining monthly payments. The difference between the two fully-amortized payments is your gross monthly payment savings. The closing costs are then spread evenly across the remaining months and subtracted, so the result reflects the net monthly benefit after paying for the refinance. To find the simple break-even point, divide the closing costs by the gross monthly payment savings — that is how many months it takes to recoup the upfront cost. 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%, you have 20 years (240 months) remaining, and closing costs are $5,000. Current payment at 7.0%: 250,000 × 0.0058333 / (1 − 1.0058333^−240) = $1,938.25. New payment at 5.5%: 250,000 × 0.0045833 / (1 − 1.0045833^−240) = $1,719.72. Gross monthly payment savings = $1,938.25 − $1,719.72 = $218.53. Spread the $5,000 closing costs over the 240 remaining months: $5,000 / 240 = $20.83 per month. Net monthly savings = $218.53 − $20.83 = $197.70, which is what the calculator reports. On the gross savings alone you recoup the $5,000 in about $5,000 / $218.53 ≈ 23 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.