🏠 Mortgage Refinance Calculator
By ToolNimba Finance Team · Reviewed by ToolNimba Editorial Review, personal finance content · Updated 2026-06-19
This calculator gives an estimate only and is not financial advice. It compares two fixed-rate, fully amortizing payments and does not include taxes, insurance, mortgage insurance, points, or the interest you may pay over a longer term. Your real cost depends on the exact terms, fees, and timing in your loan estimate. Confirm the numbers with your lender and speak to a qualified adviser before refinancing.
A refinance replaces your existing mortgage with a new loan, usually to get a lower interest rate, change the term, or both. This calculator compares your current monthly payment with the payment on a new loan, shows how much you would save each month, and works out the break-even point: how long it takes for those savings to cover the closing costs. Enter your balance, rates, terms, and costs to see whether refinancing is worth it.
What is the Refinance Calculator?
Refinancing means paying off your current mortgage with a brand-new one. People do it mainly to cut the interest rate, but you can also shorten the term to be debt-free sooner, lengthen it to lower the monthly payment, switch from an adjustable to a fixed rate, or pull out equity as cash. Whatever the goal, the new loan comes with closing costs (appraisal, origination, title, and recording fees), and the whole decision hinges on whether the savings outweigh those upfront costs.
The monthly payment on each loan is calculated with the standard amortizing formula M = P·r·(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the balance, r is the monthly rate (annual rate ÷ 12 ÷ 100), and n is the number of months. The monthly saving is simply the current payment minus the new payment. The break-even point is the closing costs divided by that monthly saving: break-even months = closing costs ÷ monthly savings. If you stay in the home longer than the break-even point, the refinance comes out ahead; if you sell or move before it, you lose money on the deal.
One trap is comparing only the monthly payment. Resetting a loan you are ten years into back to a fresh 30-year term lowers the payment, but you can end up paying more total interest because you stretch the balance over more years. A true comparison looks at the rate, the remaining versus new term, the closing costs, and how long you plan to keep the loan together. The monthly saving and break-even point this tool shows are the fastest first check, but for a full picture also weigh the total interest over the life of each loan.
When to use it
- Deciding whether a lower advertised rate is worth refinancing once closing costs are factored in.
- Finding the break-even point so you know the minimum time you must keep the home for the refinance to pay off.
- Comparing a rate-and-term refinance that keeps the same payoff date against one that resets the clock to 30 years.
- Estimating the monthly cash-flow relief from lowering the rate or extending the term when money is tight.
How to use the Refinance Calculator
- Enter your current loan balance (the amount you still owe, not the original loan amount).
- Enter your current interest rate and the years remaining on the loan.
- Enter the new interest rate and new term you are being offered.
- Enter the estimated closing costs for the refinance.
- Read off the current payment, new payment, monthly savings, and the break-even point in months.
Formula & method
Worked examples
You owe $250,000 at 6.5% with 25 years left, and refinance to 5% over a new 30-year term with $5,000 in closing costs.
- Current: r = 6.5 ÷ 12 ÷ 100 = 0.0054167, n = 300, (1+r)ⁿ = 5.056198
- Current payment = 250,000 × 0.0054167 × 5.056198 ÷ (5.056198 − 1) = $1,688.02
- New: r = 5 ÷ 12 ÷ 100 = 0.0041667, n = 360, (1+r)ⁿ = 4.467744
- New payment = 250,000 × 0.0041667 × 4.467744 ÷ (4.467744 − 1) = $1,342.05
- Monthly savings = 1,688.02 − 1,342.05 = $345.96
- Break-even = 5,000 ÷ 345.96 = 14.5 months
Result: New payment ≈ $1,342.05 · saves ≈ $345.96/mo · break-even ≈ 14.5 months
You owe $200,000 at 7% with 20 years left, and refinance to 5.5% keeping the same 20-year term with $4,000 in closing costs.
- Current: r = 7 ÷ 12 ÷ 100 = 0.0058333, n = 240, (1+r)ⁿ = 4.038739
- Current payment = 200,000 × 0.0058333 × 4.038739 ÷ (4.038739 − 1) = $1,550.60
- New: r = 5.5 ÷ 12 ÷ 100 = 0.0045833, n = 240, (1+r)ⁿ = 2.996626
- New payment = 200,000 × 0.0045833 × 2.996626 ÷ (2.996626 − 1) = $1,375.77
- Monthly savings = 1,550.60 − 1,375.77 = $174.82
- Break-even = 4,000 ÷ 174.82 = 22.9 months
Result: New payment ≈ $1,375.77 · saves ≈ $174.82/mo · break-even ≈ 22.9 months
Break-even on a $250,000 balance (currently 6.5%, 25 years left) refinanced to a new 30-year term with $5,000 closing costs
| New rate | New payment | Monthly savings | Break-even |
|---|---|---|---|
| 6.0% | $1,499 | $189 | 26 months |
| 5.5% | $1,419 | $269 | 19 months |
| 5.0% | $1,342 | $346 | 14 months |
| 4.5% | $1,267 | $421 | 12 months |
Typical mortgage refinance closing costs (rough US ranges, vary by lender and state)
| Cost item | Typical range |
|---|---|
| Origination / lender fee | 0.5% to 1% of the loan |
| Appraisal | $300 to $700 |
| Title search and insurance | $700 to $2,000 |
| Credit report and recording | $25 to $300 |
| Total closing costs | 2% to 5% of the loan amount |
Common mistakes to avoid
- Looking only at the lower monthly payment. A smaller payment can hide a higher lifetime cost. If you reset a loan you are years into back to a fresh 30-year term, you stretch the balance over more years and may pay more total interest even at a lower rate.
- Ignoring closing costs. Refinancing is not free. Appraisal, origination, title, and recording fees often run 2% to 5% of the loan. The break-even point exists precisely because you must earn those costs back through monthly savings first.
- Refinancing right before you move. If you sell or move before the break-even point, you spend more on closing costs than you recover in savings. Always check that you plan to keep the loan longer than the break-even months.
- Rolling costs into the loan and calling it free. A "no-cost" refinance usually adds the fees to your balance or charges a higher rate. You still pay, just spread out with interest, so compare the true rate and balance, not just the upfront cash.
Glossary
- Refinance
- Replacing an existing mortgage with a new loan, usually for a lower rate, a different term, or to access equity.
- Break-even point
- The number of months it takes for monthly savings to equal the closing costs: closing costs ÷ monthly savings.
- Closing costs
- Upfront fees to set up the new loan, such as origination, appraisal, title, and recording, typically 2% to 5% of the loan.
- Rate-and-term refinance
- A refinance that changes the interest rate and/or the loan term without taking out extra cash.
- Amortization
- The schedule that splits each payment into interest and principal and reduces the balance to zero over the term.
Frequently asked questions
How do I calculate the break-even point on a refinance?
Divide the closing costs by your monthly savings. For example, $5,000 in closing costs and $250 a month saved gives a break-even of 20 months. If you keep the home longer than that, the refinance pays off; if you move sooner, it costs you money.
Should I refinance my mortgage?
Refinancing usually makes sense when the new rate is meaningfully lower, the closing costs are reasonable, and you plan to stay past the break-even point. It is less attractive if you are near the end of the loan, plan to move soon, or would reset a nearly paid-off balance back to a full new term.
Does a lower monthly payment always mean I save money?
No. A lower payment can come from stretching the balance over a longer term, which may increase the total interest you pay over the life of the loan. Look at the rate, the remaining versus new term, and the total interest, not just the monthly figure.
What are typical refinance closing costs?
Closing costs usually run about 2% to 5% of the loan amount and include origination or lender fees, an appraisal, title search and insurance, and recording and credit fees. They vary widely by lender and by state, so use your loan estimate for the real number.
What is a no-cost refinance?
A no-cost refinance means you pay no fees upfront, but the lender recovers them by adding the costs to your loan balance or charging a slightly higher interest rate. You still pay, just over time with interest, so compare the true rate and balance carefully.
How much lower does the rate need to be to refinance?
There is no fixed rule. The old "drop at least 1%" guideline is a starting point, but what really matters is whether the monthly savings recover your closing costs before you move. On a large balance, even a half-point cut can break even quickly; on a small balance it may not.
Sources
- When can refinancing make sense? , U.S. Consumer Financial Protection Bureau
- Refinance , Investopedia