Refinance Calculator

About the Refinance Calculator

A refinance calculator determines whether refinancing your mortgage makes financial sense — comparing your current loan's remaining cost against the cost of a new loan, calculating your monthly savings, total interest savings over the new loan term, and the break-even point (how many months of savings it takes to recover the closing costs of the refinance). Refinancing can save tens of thousands of dollars in interest and reduce monthly payments significantly, but it also resets your amortisation clock, meaning you will pay more interest in the early years of the new loan. Our free refinance calculator gives you the complete picture: monthly payment comparison, total cost comparison over the remaining life of your current loan versus the new loan, the all-important break-even analysis, and guidance on when rate and payment savings justify the upfront closing cost investment.

How It Works

Monthly savings = Current monthly payment - New monthly payment. Break-even months = Closing costs / Monthly savings. Example: current mortgage has $285,000 remaining at 7.5%, 22 years left. Current payment: $2,198/month. Refinance to 6.25% for 30 years: new payment = $1,755/month. Monthly savings = $2,198 - $1,755 = $443/month. Closing costs: $6,500. Break-even = $6,500 / $443 = 14.7 months (approximately 15 months). If you plan to stay over 15 months, refinancing saves money. Total interest comparison: current loan total remaining interest = approximately $296,000. New 30-year loan total interest = approximately $346,000. Note: lower monthly payment but higher total cost because the term extends from 22 years to 30 years — the refinance calculator reveals this important distinction.

Tips & Best Practices

• ✓The 1% rule is oversimplified: the commonly cited "only refinance if you can lower your rate by 1%" is too broad. A 0.5% reduction on a $500,000 mortgage may easily justify refinancing, while a 1.5% reduction on a $50,000 balance might not cover closing costs.
• ✓Rate-and-term versus cash-out refinance: a rate-and-term refinance lowers your rate or shortens your term without extracting equity. A cash-out refinance borrows against home equity — it has different economics and uses, including funding home improvements or consolidating high-rate debt.
• ✓No-closing-cost refinances: some lenders offer zero closing cost options, typically by rolling costs into the loan balance or accepting a slightly higher rate. These may be better if you plan to sell or refinance again within a few years, before the break-even of a standard refinance.
• ✓Resetting to 30 years: refinancing from year 8 of a 30-year mortgage to a new 30-year term at a lower rate may lower your payment but increase your total interest paid. Consider refinancing to a 20 or 25-year term to maintain your payoff timeline while capturing the lower rate.
• ✓Current home equity requirement: most lenders require at least 20% equity (loan-to-value ratio of 80% or less) for the best refinance rates and to avoid PMI on the new loan. Obtain a recent appraisal estimate before assuming you meet this threshold.
• ✓Credit score impact: a mortgage refinance application creates a hard credit inquiry. Multiple refinance applications within a 45-day window are typically treated as one inquiry by credit bureaus for rate-shopping purposes.
• ✓Closing costs to negotiate: application fee, origination fee, points, title insurance, and appraisal fee are often negotiable or can be offset by seller credits in purchase transactions. Get loan estimates from at least three lenders.
• ✓ARM to fixed-rate conversion: homeowners with adjustable-rate mortgages nearing their adjustment period often refinance to fixed-rate loans for payment predictability, even without a significant rate reduction.

Who Uses This Calculator

Homeowners evaluating whether current lower mortgage rates justify the cost of refinancing their existing loan. People with adjustable-rate mortgages who want to lock in a fixed rate before adjustments begin. Homeowners looking to shorten their loan term (from 30 to 15 years) to build equity faster and reduce total interest. People considering cash-out refinancing for home improvements, debt consolidation, or other major expenses. Mortgage advisors and loan officers presenting refinancing scenarios to clients.