Refinance Savings Calculator
Refinancing can lower your monthly payment and save thousands in interest, but upfront closing costs mean you need to stay in the home long enough to break even. This calculator compares your current mortgage payment to a new one, estimates total closing costs, shows your monthly savings, and calculates exactly how many months until the refinance pays for itself. Enter your current and proposed loan details below.
Refinance savings formula
Monthly Payment = P x [r(1+r)^n] / [(1+r)^n - 1]
Where P = loan balance, r = monthly rate (annual rate / 12), n = term in months. This standard amortization formula is used by lenders, the CFPB, and Fannie Mae.
Break-Even Months = Closing Costs / (Old Payment - New Payment)
After the break-even date, every month is net savings. Total lifetime savings = (Monthly Savings x Remaining New Term Months) - Closing Costs.
Key factors in a refinance decision
- Rate reduction: A drop of at least 0.5 to 1 percentage point is often cited as a general threshold, though the actual benefit depends on your loan size and remaining term.
- Break-even period: Compare this to how long you plan to stay in the home before moving or refinancing again.
- Term reset risk: Restarting a 30-year term may increase total interest paid, even with a lower rate.
- Cash-out refinancing: If you are taking cash out, account for the higher loan balance when comparing payments.
- Credit score impact: A higher credit score since your original loan could earn you a better rate than what the market advertises.
Refinance savings calculator: frequently asked questions
How do I calculate refinance savings?
Refinance savings = (Old Monthly Payment - New Monthly Payment) x Remaining Months. Subtract total closing costs to get net savings over the life of the new loan. The monthly payment uses the standard mortgage amortization formula: P x [r(1+r)^n] / [(1+r)^n - 1].
What is the refinance break-even point?
The refinance break-even is the number of months it takes for cumulative monthly savings to equal the upfront closing costs. Break-Even Months = Closing Costs / Monthly Payment Savings. If you plan to stay in the home longer than the break-even period, refinancing likely makes financial sense.
What are typical refinance closing costs?
Refinance closing costs typically range from 2 to 5% of the loan amount. They include origination fees, appraisal, title search and insurance, recording fees, and prepaid items such as homeowners insurance and property taxes. Some lenders offer no-closing-cost refinances, where costs are rolled into a higher rate.
Should I refinance if I plan to move soon?
Generally no. If your break-even is 36 months and you plan to sell in 24 months, you will not recover the closing costs through payment savings. The shorter your expected remaining time in the home, the larger the payment reduction needs to be to justify refinancing costs.
Does refinancing reset my mortgage term?
A new 30-year refinance restarts your amortization clock, which can mean paying more total interest even at a lower rate if you are far into your current loan. Consider refinancing into a shorter term (15 or 20 years) to save interest while lowering your rate. Run both scenarios to compare total interest paid.
Official sources
- Consumer Financial Protection Bureau (CFPB): Refinancing Your Home.
- Federal Reserve Board: Selected Interest Rates (H.15).
- Freddie Mac: Primary Mortgage Market Survey (PMMS).
Reviewed by the CalculatorHub team, edited by James Graham, 14 June 2026. See our methodology.