Refinance Calculator
Free refinance calculator. Compare your current loan against a new rate and term, see monthly savings, break-even point, and total interest change.
A refinance calculator compares your existing loan against a replacement loan and tells you whether switching saves money. It reports both monthly payments, the change in total interest, and the break-even point in months — the time it takes for the monthly saving to recover the closing costs. On the defaults — $200,000 at 6.5% with 240 months left, refinanced to 5.25% over 240 months with $4,000 in fees — the payment drops from $1,491 to $1,375, saving $116.50 a month, and break-even is 35 months.
The payment formula
Both loans use the standard amortizing payment, where r = annual rate ÷ 12 and n = months:
payment = principal × r ÷ (1 − (1 + r)−n)
The new loan is sized at the current balance plus closing costs, because those fees are usually rolled into the new principal. Total cost for each loan is the payment × its remaining months.
Worked example with the defaults
| Step | Calculation | Result |
|---|---|---|
| Current payment | $200,000 at 6.5% for 240 months | $1,491/mo |
| Current total remaining cost | $1,491 × 240 | $357,875 |
| New principal | $200,000 + $4,000 fees | $204,000 |
| New payment | $204,000 at 5.25% for 240 months | $1,375/mo |
| New total cost | $1,375 × 240 | $329,914 |
| Monthly saving | $1,491 − $1,375 | $116.50 |
| Total interest change | $357,875 − $329,914 | −$27,961 |
| Break-even | $4,000 ÷ $116.50, rounded up | 35 months |
You need to keep the loan for at least 35 months for the $4,000 fee to pay for itself. Past that point you are ahead by $116.50 every month.
How much lower does the rate need to be?
Same $200,000 balance, 240 months remaining, $4,000 in costs, refinanced to a fresh 240-month term:
| New rate | New payment | Monthly saving | Break-even |
|---|---|---|---|
| 6.25% | $1,491 | $0.05 | 75,847 months |
| 6.00% | $1,462 | $29.63 | 136 months |
| 5.75% | $1,432 | $58.90 | 68 months |
| 5.50% | $1,403 | $87.86 | 46 months |
| 5.25% | $1,375 | $116.50 | 35 months |
| 5.00% | $1,346 | $144.84 | 28 months |
A rate cut of a quarter point barely moves the needle once fees are counted; the break-even stretches past any realistic holding period.
Common mistakes
- Comparing payments only. A longer new term can lower the payment while increasing lifetime interest. Compare the total interest change as well.
- Ignoring closing costs. If break-even is 46 months and you might sell in 30, the refinance loses money.
- Resetting the clock. Replacing 240 remaining months with a new 360-month loan restarts the amortization and often adds interest even at a lower rate.
- Using a rough fee estimate. Get the actual Loan Estimate; the fee drives the break-even more than the rate usually does.
Does the calculator include taxes, insurance, or PMI?
No. It compares principal and interest only. If a refinance changes your escrow, PMI, or any lender credits, add those separately before deciding.
What if the new loan is not worth it?
The tool says so plainly when the new payment is not lower or the total interest rises. In that case stay put, or look for a lower rate or lower fees.
Should I shorten the term or lower the payment?
Shortening the term raises the payment but cuts total interest; lengthening it does the reverse. Use the total interest change row to see which trade you are actually making.
Do I have to pay closing costs upfront?
Not necessarily. They are often rolled into the new loan balance, which is why this calculator adds them to the new principal. Rolling them in raises the payment slightly and increases total interest, but keeps cash in hand. Paying upfront lowers the monthly figure but draws on savings.
What about a cash-out refinance?
This tool compares rate-and-term refinancing only. A cash-out refinance borrows more than the balance owed and hands the difference to you in cash, increasing the principal and the payment. Raise the new principal by the cash amount to approximate that scenario.
What to check before you sign
- The Loan Estimate, not a verbal quote. The break-even depends on the exact fees, and they are itemised there.
- Whether the new term resets your remaining time. A fresh 30-year loan on a home you have paid for ten years restarts the clock.
- Any change to escrow or PMI. These are outside the model and can erase a small monthly saving.
For a car rather than a home, the same comparison runs on the auto loan calculator. If the goal is to be debt-free sooner instead of cheaper, the mortgage payoff accelerator shows what extra payments do.