Refinance Calculator
Evaluate whether refinancing makes financial sense with this mortgage refinance calculator. Input your remaining loan balance, current monthly payment, the new interest rate you would get, your new loan term, and the closing costs of the refinance to instantly see your new monthly payment, monthly savings, break-even period and total interest saved. The break-even calculation shows how many months it will take for your cumulative monthly savings to cover the upfront refinance costs. If you plan to stay in the home longer than the break-even point, refinancing typically pays off. Compare different scenarios: lower rates, longer terms, or even building equity faster with a shorter term. See both the immediate monthly payment impact and the long-term interest savings.
Refinancing a $280,000 balance at 6.0% for 30 years gives a monthly payment of $1,678.74, saving $121.26/month. Break-even on $4,000 closing costs: 33 months.
How the break-even calculation works
The break-even period tells you how many months it takes for your cumulative monthly savings to cover the upfront closing costs of the refinance. The formula is straightforward:
break-even months = closing costs / monthly savings
monthly savings = current monthly payment - new monthly P+I payment
If you plan to stay in the home longer than the break-even period, refinancing typically makes financial sense on a pure payment basis. If you expect to move or sell before break-even, the closing costs may outweigh the savings.
Note that this calculation compares only principal and interest payments. It does not account for the change in total remaining interest obligation when you extend or shorten the loan term.
Worked example
$280,000 remaining balance, current payment $1,800/month, new rate 6.0% for 30 years, $4,000 closing costs:
- r = 6.0 / 100 / 12 = 0.005000
- n = 30 x 12 = 360
- New monthly P+I = 280,000 x 0.005 x (1.005)^360 / ((1.005)^360 - 1) = $1,678.74
- Monthly savings = $1,800 - $1,678.74 = $121.26
- Break-even = $4,000 / $121.26 = approximately 33 months
In this example, if you plan to stay in the home more than about 33 months (roughly 3 years), refinancing recovers its upfront cost through lower payments.
How the new monthly payment is calculated
The new monthly principal and interest payment uses the standard PMT formula, the same formula described by the CFPB in Understand Loan Options:
r = annual rate / 100 / 12
n = term years x 12
monthly P+I = balance x r x (1 + r)^n / ((1 + r)^n - 1)
The approximate interest saved figure compares the total interest on the new loan against the remaining interest from your current payment stream (current monthly payment x remaining months implied by balance and rate). Because your current loan's remaining term is unknown, this figure is an approximation for comparison purposes.
Why a lower payment can still cost more
The number most people watch when refinancing, the lower monthly payment, can quietly cost more over time. Refinancing into a fresh 30-year loan re-amortizes your remaining balance over a brand-new term, so a smaller payment often hides a larger total interest bill. This calculator's default scenario shows the trap: the monthly payment falls by $121.26, yet "approximate interest saved" reads N/A, because stretching a $280,000 balance back across 360 months adds more interest than the lower rate strips out.
That is why the break-even figure here measures cash recovery only: closing costs divided by monthly savings ($4,000 / $121.26 = 33 months). It answers when you earn back your closing costs, not whether you pay less interest over the life of the loan. Those are separate questions. If you are already several years into a mortgage, refinancing into another 30-year term restarts the clock. To keep the savings a lower rate should deliver, match the new term to the years you have left, or keep paying the old amount so the difference reduces principal.
One practical rule outweighs the old "1% lower rate" guidance: how long you stay matters more than the size of the rate cut. A refinance that breaks even in 33 months is a poor deal if you plan to sell in two years and a strong one if you are staying a decade. And use the Loan Estimate your lender is required to send for the real closing-cost number; the 2% to 5% ranges quoted online are only a starting point.
Refinance calculator: frequently asked questions
What does it cost to refinance a mortgage?
Typical closing costs run 2 to 5 percent of the loan amount, covering appraisal, origination, title fees and other charges. Your lender is required to provide a Loan Estimate form within three business days of your application under RESPA. The exact figure comes from that form, not from estimates. Source: CFPB, consumerfinance.gov.
When is refinancing worth it?
A common rule of thumb is that refinancing makes financial sense when your break-even period is under 24 to 36 months and you plan to stay in the home longer than that. Compare the total cost of refinancing (including closing costs) against the total monthly savings over your expected remaining time in the home.
What is a rate-and-term refinance?
A rate-and-term refinance replaces your existing mortgage with a new one at a different interest rate, a different term, or both. It does not materially change the loan balance beyond rolling in closing costs. It is the most common type of refinance.
What is a cash-out refinance?
A cash-out refinance lets you borrow more than your existing outstanding balance. The difference between the new loan amount and what you owe is paid out to you as cash. This increases your loan balance and typically results in a higher monthly payment. The CFPB covers cash-out refinancing at consumerfinance.gov.
Official sources
- CFPB, Refinancing: What is refinancing and how does it work?
- CFPB, Loan Estimate: consumerfinance.gov/owning-a-home/loan-estimate/
- PMT formula and mortgage concepts: CFPB, Understand Loan Options.
Reviewed by the CalculatorHub team, edited by James Graham, 12 June 2026. See our methodology. General information, not financial advice.