LOANS & DEBT
Refinance Calculator
By Worldtickers ·
Use our free refinance calculator to compare your current mortgage payment against a new rate and term, and find out exactly how many months it takes to break even on your closing costs. Includes the formula, worked examples, and what to do when the numbers don't favor refinancing.
This refinance tool focuses on use our free refinance calculator to compare your current mortgage payment against a new rate and term, and find out exactly how many months it takes to break even on your closing costs. Includes the formula, worked examples, and what to do when the numbers don't favor refinancing. Use it to compare borrowing costs, monthly payments, interest charges, payoff timelines, and refinance or repayment choices by changing the rate, term, balance, and payment assumptions.
Refinance Calculator
Refinance Calculator
Enter your current loan details, the new rate and term you're offered, and your closing costs to see your monthly savings and how long it takes to break even.
What Is Mortgage Refinancing?
Refinancing replaces your current mortgage with a new loan — usually to get a lower interest rate, change your loan term, or both. The new loan pays off your existing balance, and you start making payments on the new terms instead. Because a refinance is a brand-new loan, it comes with its own closing costs, just like your original mortgage did.
The financial question a refinance calculator answers is simple to ask but easy to get wrong by intuition alone: does the lower monthly payment save you enough, quickly enough, to justify what you spend upfront in closing costs? That answer depends on your current rate and balance, the new rate and term you're offered, and the specific closing costs on the new loan — all of which this calculator takes into account together.
If your main goal is paying off your existing loan faster rather than lowering your rate, see our mortgage payoff calculator instead, which models extra payments on your current loan rather than replacing it.
How to Use This Calculator
Enter six figures describing your current loan and the refinance offer you're evaluating.
Current Loan Balance
Your current remaining principal balance — not your original loan amount, unless you haven't made any payments yet. This is also the amount you'll be borrowing in the new loan.
Current Interest Rate and Current Remaining Term
The rate and number of years left on your existing mortgage, exactly as it stands today.
New Interest Rate and New Loan Term
The rate and term you're being offered on the refinance. Note that the new term does not have to match your current remaining term — many refinances reset to a fresh 30-year (or 15-year) term.
Closing Costs
The total upfront cost of the new loan — origination fees, title fees, appraisal, points, and any other closing charges quoted by the lender.
The Formula Explained
Both payments use the standard amortization formula: M = P × r × (1 + r)^n ÷ [(1 + r)^n − 1], where P is the loan principal, r is the monthly interest rate, and n is the number of monthly payments.
Current Monthly Payment uses P = current balance, r = current rate ÷ 12, and n = current remaining term in months. New Monthly Payment uses the same current balance as P(since that's the amount actually being refinanced), but with the new rate and the new term's months substituted in.
Monthly Savings = Current Monthly Payment − New Monthly Payment. If this is positive, the break-even point in months is Closing Costs ÷ Monthly Savings. If Monthly Savings is zero or negative, there is no meaningful break-even point — refinancing doesn't reduce your payment at all, so no amount of time recoups the closing costs through payment savings, and the calculator reports this directly instead of a distorted number.
Worked Examples
Example 1: $300,000 Balance, 6.5% → 5.5%, 25 Years Remaining Into a New 30-Year Term
Current payment: P = $300,000, r = 6.5% ÷ 12 ≈ 0.5417%, n = 300 months (25 years). M ≈ $2,025.62 per month.
New payment: same $300,000 balance, r = 5.5% ÷ 12 ≈ 0.4583%, n = 360 months (30 years). M ≈ $1,703.37 per month. Monthly savings = $2,025.62 − $1,703.37 = $322.25. With $5,000 in closing costs, the break-even point is $5,000 ÷ $322.25 ≈ 15.5 months (about 1.3 years) — after that point, every month you keep the new loan is pure savings versus staying with the old one.
Example 2: $220,000 Balance, 7% → 5.75%, Both at 20 Years
Current payment: P = $220,000, r = 7% ÷ 12 ≈ 0.5833%, n = 240 months. M ≈ $1,705.66 per month. New payment: same balance, r = 5.75% ÷ 12 ≈ 0.4792%, n = 240 months (keeping the same 20-year term rather than resetting to 30). M ≈ $1,544.58 per month. Monthly savings ≈ $161.07. With $4,000 in closing costs, break-even = $4,000 ÷ $161.07 ≈ 24.8 months (about 2.1 years) — longer than Example 1, because keeping the same term instead of resetting to 30 years produces a smaller monthly payment drop for a similar rate improvement.
Example 3: When Refinancing Doesn't Save Money
Suppose your current balance is $300,000 at a 4% rate with 25 years remaining (payment ≈ $1,583.51), and the only refinance offer available is 6% over a new 30-year term (payment ≈ $1,798.65). Monthly "savings" here is actually −$215.14 — the new payment is higher, not lower. In this case the calculator reports that refinancing does not save money at these terms, rather than displaying a meaningless negative break-even period.
Tips and Limitations
Compare Break-Even Against How Long You'll Stay
The break-even point only pays off if you keep the new loan at least that long. If you expect to sell or refinance again before then, the upfront costs may never be recouped even with a genuinely lower rate.
A Longer New Term Can Mask Higher Lifetime Interest
Resetting your remaining 20 years into a fresh 30-year term lowers the monthly payment, but you'll pay interest for 10 additional years you wouldn't have paid otherwise. This calculator focuses on monthly cash flow and break-even; if you want the total interest picture over the life of each loan, run both scenarios through our amortization schedule calculator.
Get Multiple Quotes
Closing costs and rates both vary meaningfully between lenders for the same borrower. Run this calculator once per quote — the lowest rate isn't automatically the best deal if it comes with substantially higher closing costs and you don't plan to keep the loan very long.
This Doesn't Account for Tax or PMI Changes
If refinancing removes or adds private mortgage insurance (PMI), or changes an escrowed tax/insurance amount, your actual total payment change may differ from the principal-and-interest figures shown here. Check your loan estimate for the full payment breakdown.
Frequently Asked Questions
What is a refinance break-even point?
The break-even point is how many months it takes for your monthly savings from refinancing to add up to more than what you spent in closing costs. Before that point, you're technically behind on the deal even though your payment is lower; after it, every additional month you keep the loan is money saved compared to not refinancing. It's calculated as closing costs divided by monthly savings, and it's the single most useful number for deciding whether a refinance is worth doing given how long you plan to keep the home or loan.
What closing costs should I include?
Include everything the lender and third parties charge to originate the new loan: origination fees, appraisal fee, title insurance and search fees, recording fees, credit report fees, and any discount points you pay to buy down the rate. Some lenders offer a 'no-closing-cost' refinance that rolls these fees into the loan balance or a slightly higher rate instead of charging them upfront — if you have one of those, enter $0 in closing costs, since there's no upfront amount to break even on (though you're still paying for it through a higher balance or rate).
Does a lower interest rate always mean I'll save money by refinancing?
Not necessarily. If you refinance into a longer term, even a meaningfully lower rate can produce a higher monthly payment, because you're financing the same balance (or more, if the term partially reset your amortization) with less time between now and payoff. Always compare the new monthly payment directly against your current one, as this calculator does, rather than assuming a lower rate automatically means lower payments.
What if refinancing doesn't lower my payment?
If the new monthly payment is equal to or higher than your current one, there is no monthly savings to offset the closing costs, so no break-even point exists in the traditional sense — refinancing would cost you money every month rather than saving it, on top of the upfront closing costs. This calculator flags that scenario directly instead of showing a nonsensical negative or infinite break-even number. In that case, refinancing might still make sense for non-payment reasons (like removing a co-borrower or switching loan types), but not for monthly savings.
Should I refinance if I'm planning to move soon?
Compare your expected time in the home (or before you'd otherwise pay off or sell) against the break-even point. If you plan to move before you reach break-even, the refinance will cost you money overall even though your monthly payment is lower while you have it — you simply won't hold the loan long enough to recoup the closing costs through monthly savings.
Does refinancing reset my amortization?
Yes — a refinance is a brand-new loan, so it amortizes from scratch over whatever new term you choose, even if you've already paid down years of your current mortgage. This is why the new-term length matters so much: refinancing your remaining 20 years into a new 30-year loan can lower your payment noticeably, but it also means paying interest over a longer horizon than if you had kept your original loan on schedule. Use our amortization schedule calculator to see the interest cost difference over the life of each option.
Is it worth refinancing for less than a 1% rate drop?
It depends heavily on your loan balance, remaining term, and closing costs — there's no universal rule of thumb that applies to every loan size. A small rate drop on a large balance with a long remaining term can still produce meaningful monthly savings and a fast break-even, while the same rate drop on a small balance or a short remaining term might barely move the payment at all. Run your actual numbers through the calculator above rather than relying on a generic percentage threshold.