Mortgage Refinance Calculator
Compare your current mortgage with new loan terms to see if refinancing saves you money
Current Mortgage
New Loan Terms
Refinance Analysis
Monthly Savings
$288.19/month
Current Payment
$2,025.62
New Payment
$1,737.43
Break-Even Point
21 months
~1.8 years to recoup closing costs
Current Total Interest
$307.69K
New Total Interest
$319.48K
Interest Savings
$-11789.92
Lifetime Net Savings (after closing costs)
-$17.79K
New Loan Amount
$306,000.00
Balance + closing costs
Balance Comparison
| Year | Current Owed | New Owed |
|---|---|---|
| 1.0 | $295.05K | $301.88K |
| 3.0 | $284.12K | $292.92K |
| 5.0 | $271.69K | $282.93K |
| 7.0 | $257.53K | $271.78K |
| 9.0 | $241.41K | $259.33K |
| 11.0 | $223.06K | $245.44K |
| 13.0 | $202.17K | $229.94K |
| 15.0 | $178.39K | $212.64K |
| 17.0 | $151.32K | $193.33K |
| 19.0 | $120.50K | $171.79K |
| 21.0 | $85.42K | $147.74K |
| 23.0 | $45.47K | $120.91K |
| 25.0 | $0.00 | $90.96K |
| 27.0 | $0.00 | $57.54K |
| 29.0 | $0.00 | $20.24K |
Lower payment but higher lifetime cost
You recoup closing costs in 21 months and save $-17789.92 over the life of the loan.
Complete Guide to Mortgage Refinancing
What Is Mortgage Refinancing?
Mortgage refinancing is the process of replacing your existing home loan with a new one, usually to secure a lower interest rate, change the loan term, or tap into home equity. The new lender pays off your old mortgage, and you begin making payments under the new terms.
Refinancing makes the most sense when interest rates have dropped significantly since you took out your original loan, or when your credit score has improved enough to qualify for better terms. Use our Mortgage Affordability Calculator to see how much home you can afford under different rate scenarios, and our Loan Amortization Calculator to view the full month-by-month breakdown of your new loan.
Key Formulas
Monthly Payment (Amortization):
PMT = P × r(1+r)^n / ((1+r)^n − 1)
Where: P = loan principal, r = monthly interest rate (annual / 12 / 100), n = total months.
Break-Even Point:
Break-Even Months = Closing Costs / Monthly Savings
Monthly Savings = Current Payment − New Payment. If savings ≤ 0, refinancing does not reduce your monthly obligation.
Lifetime Net Savings:
Net Savings = (Current PMT × Remaining Months) − (New PMT × New Term Months) − Cash-Out
Benefits of Refinancing
Lower Monthly Payment
A lower interest rate or longer term reduces your monthly obligation, freeing up cash flow for savings, investments, or other expenses.
Reduce Total Interest
Even a 1% rate reduction on a $300,000 loan can save $50,000+ in interest over the life of the loan. Check exact savings with our Simple Interest Calculator.
Shorten Your Loan Term
Refinancing from a 30-year to a 15-year mortgage builds equity faster and eliminates your mortgage years sooner, even if the monthly payment increases slightly.
Access Home Equity
A cash-out refinance lets you borrow against your equity for home improvements, debt consolidation, or major expenses. See how much equity you have with our Home Equity Calculator.
Tips for a Smart Refinance
Target at least a 0.75%–1% rate drop: A smaller gap may not generate enough monthly savings to offset closing costs within a reasonable timeframe. Calculate your exact break-even above.
Shop multiple lenders: Rates and closing costs vary significantly between lenders. Getting 3–5 loan estimates can save thousands. Compare total cost, not just the rate.
Consider rolling costs into the loan: If you lack cash for closing costs, you can finance them into the new loan. This increases the balance but avoids out-of-pocket expense. Our calculator handles this by adding closing costs to the new loan amount.
Common Mistakes
Ignoring the Break-Even Point
If you plan to sell within 2–3 years, the closing costs may exceed your savings. Always check whether you will stay past the break-even month before committing to a refinance.
Restarting the Clock on a 30-Year Term
Refinancing 25 years into a 30-year mortgage to a new 30-year term resets your payoff timeline. You get a lower payment, but you pay interest for 30 more years instead of 5. Compare the total cost carefully.
Focusing Only on the Rate
A lower rate with high closing costs can cost more than a slightly higher rate with minimal fees. Always compare the total lifetime cost (principal + interest + closing costs), not just the monthly payment.
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OpenFrequently Asked Questions
What is mortgage refinancing?
Mortgage refinancing replaces your existing home loan with a new one, typically at a different interest rate or term. The new loan pays off the old one, and you begin making payments on the new terms. The goal is usually to lower your monthly payment, reduce total interest, shorten the loan term, or access home equity through a cash-out refinance.
How do I calculate the break-even point on a refinance?
Divide your total closing costs by the monthly payment savings. For example, if closing costs are $6,000 and you save $200/month, break-even = 6,000 / 200 = 30 months. If you plan to stay in the home longer than 30 months, refinancing is likely worth it. If you plan to sell sooner, you may not recoup the costs.
What closing costs should I expect when refinancing?
Refinance closing costs typically run 2%–5% of the loan balance. Common items include loan origination fee (0.5%–1%), appraisal ($300–$700), title insurance ($500–$1,500), credit report fee, recording fees, and prepaid items like property taxes and insurance escrow. On a $300,000 refinance, expect roughly $6,000–$15,000 in total closing costs.
Should I refinance to a shorter term or the same term?
A shorter term (e.g., 25 years remaining → 15-year refinance) raises your monthly payment but dramatically reduces total interest. A same-length or longer term lowers the payment but you pay more interest over time. The right choice depends on your cash flow: if you can afford higher payments, the shorter term builds equity faster and costs less overall.
What is a cash-out refinance?
A cash-out refinance lets you borrow more than your current balance and receive the difference as cash. For example, if you owe $200,000 on a home worth $350,000, you might refinance for $250,000 and receive $50,000 in cash (minus closing costs). The cash can be used for home improvements, debt consolidation, or other expenses, but it increases your loan balance and total interest.
Can you walk through a worked example?
Current loan: $300,000 balance at 6.5% with 25 years remaining → payment = $2,030.73/mo, total interest = $309,219. New loan: refinance at 5.5% for 30 years with $6,000 closing costs → new balance $306,000, payment = $1,737.27/mo, monthly savings = $293.46, break-even = 21 months. Total new interest = $319,416 but lifetime net savings = $54,462 versus keeping the old loan.