Mortgage Refinance Calculator
Compare your current loan against a refinance, including costs.
- Author
- CentCompass Research Team
- Reviewed by
- Editorial Review
- Last Updated
- Reading Time
- 4 min read
Current payment
$2,139.13
New payment
$1,847.15
Monthly change
$291.98
Break-even
21 mo
Interest left on current loan
$367,408.31
Interest on new loan
$364,974.58
Lifetime savings (after costs)
-$3,566.27
The new term is longer than what remains on your current loan. The monthly payment falls, but you are borrowing for longer — check the lifetime figure, not just the payment.
What is the Refinance Calculator?
A mortgage refinance calculator compares the loan you have against the loan you are being offered, including the closing costs that make the decision non-obvious. Refinancing replaces your existing mortgage with a new one, and the headline question — is the new rate lower? — is rarely the one that matters most. What matters is whether the monthly saving repays the costs before you move or sell, and whether a longer new term quietly raises the lifetime cost.
How the calculation works
The calculator amortizes your current balance twice. First over the years remaining at your existing rate, giving your current payment and the interest still to come. Then over the new term at the new rate, giving the proposed payment and its total interest. Subtracting one payment from the other gives the monthly saving; dividing the closing costs by that saving gives the break-even point in months. The lifetime comparison subtracts the closing costs from the interest difference, which is where a longer term often turns an apparent win into a loss.
The formula
Both loans use M = P · [r(1+r)^n] / [(1+r)^n − 1] on the same principal P — your current balance — with each loan's own r and n. Monthly saving = M_current − M_new. Break-even months = closing costs ÷ monthly saving, undefined when the payment does not fall. Lifetime saving = (interest remaining on current loan) − (interest on new loan) − closing costs, which can be negative even when the monthly payment improves.
Worked example
A $300,000 balance at 7.25% with 26 years left carries a payment around $2,139. Refinancing into a 30-year loan at 6.25% drops it to about $1,847 — a saving near $292 a month. With $6,000 of closing costs, break-even arrives at month 21, so the refinance pays for itself in under two years if you stay. But note the new term adds four years back onto the loan, which is why the lifetime figure deserves as much attention as the monthly one.
Tips
- Compare the break-even against how long you realistically expect to keep the house.
- Ask for a Loan Estimate from several lenders — the standardised form makes offers comparable.
- Refinancing into a shorter term captures the rate cut without extending the debt.
- Rolling closing costs into the balance avoids cash upfront but means paying interest on them.
- A no-closing-cost refinance is not free; the cost is embedded in a higher rate.
Common mistakes
- Judging the deal purely on the monthly payment while a longer term raises the total cost.
- Refinancing shortly before moving, so the closing costs are never recovered.
- Resetting a mortgage that is already well into its principal-heavy years back to a fresh 30-year clock.
- Comparing the new interest rate against the old APR rather than like against like.
- Overlooking that cash-out refinancing increases the balance and therefore the interest.
Limitations
The comparison covers principal and interest on the same balance. It excludes escrow, PMI changes, cash-out amounts, points, prepaid interest, and the tax treatment of mortgage interest, and it assumes you keep the new loan to term. It also assumes fixed rates on both sides, so it does not describe refinancing into or out of an adjustable-rate mortgage.
Frequently asked questions
What is refinancing?
Refinancing replaces your existing mortgage with a new loan, usually to obtain a lower rate, change the term, or convert between fixed and adjustable rates. The new loan pays off the old one and you begin a fresh amortization schedule.
What is the break-even point?
It is how long the monthly saving takes to repay the closing costs. If closing costs are $6,000 and you save $300 a month, break-even is 20 months — refinance only if you expect to keep the loan comfortably beyond that.
How much does refinancing cost?
Closing costs commonly run 2–5% of the loan amount, covering origination, appraisal, title, and recording. They can be paid upfront, rolled into the balance, or offset by accepting a higher rate.
How much lower does the rate need to be?
The old rule of thumb was a full percentage point, but the honest answer depends on your balance, the costs, and how long you will stay. A small rate cut on a large balance with low costs can be worth it; a large cut is not worth it if you move next year.
Does refinancing restart my mortgage?
Yes — a new loan means a new amortization schedule, beginning again in the interest-heavy early years. Refinancing a 30-year loan you are ten years into back to a fresh 30-year term can raise lifetime interest even at a lower rate.
Should I refinance into a shorter term?
If you can afford the higher payment, moving from 30 years to 15 captures both the rate cut and a dramatic reduction in total interest. It is usually the better use of a refinance than extending the term for cash flow.
What is a no-closing-cost refinance?
The lender covers the costs in exchange for a higher interest rate, or folds them into the balance. Nothing is waived — you pay through the rate instead, which is often more expensive if you keep the loan for many years.
What is a cash-out refinance?
It replaces your mortgage with a larger one and returns the difference in cash, using home equity. The rate is often slightly higher than a rate-and-term refinance, and the larger balance means more interest overall.
Will refinancing affect my credit score?
The application triggers a hard inquiry and the new account slightly lowers your average account age, so a small temporary dip is normal. Shopping several lenders within a short window is generally treated as a single inquiry for scoring.
Can I refinance with little equity?
Conventional refinancing usually expects meaningful equity, and below 20% you may face PMI on the new loan. Government-backed streamline programs exist for some FHA and VA borrowers with lighter requirements.
Related calculators
Related guides
Sources
- CFPB — What is a mortgage refinance?
- Freddie Mac — Primary Mortgage Market Survey
- CFPB — Loan Estimate Explainer
How this page is produced and reviewed
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