How to use the refinance calculator
Build the current loan first from a recent statement: the principal balance, the note rate and the number of payments left. Leave the current payment at 0 to have it calculated, or enter the principal-and-interest amount from your statement if it's different. Keep escrow for taxes and insurance out.
Then enter one written offer. Use the note rate, not the APR, and copy the points, lender credits and costs from the same Loan Estimate.
- Enter the property value, current balance, current rate and payments remaining.
- Add current monthly mortgage insurance if you pay it.
- Enter the new rate, new term and any new mortgage insurance.
- Enter closing costs, discount points, lender credits and any prepayment penalty on the old loan.
- Add cash out if you'll take some, and choose whether costs are paid upfront or added to the loan.
- Set how many years you expect to keep the loan, then calculate.
Refinance mortgage calculator example
You owe $280,000 at 7% with 300 payments left, so your principal and interest is $1,978.98. A lender offers 6.25% on a new 30-year loan with $4,500 of costs paid upfront. The new payment is $1,724.01, which is $254.97 less each month.
Over a five-year hold, you come out $4,708.17 ahead once balances are counted. After five years you'd owe $261,344.28 on the new loan versus $255,254.03 on the old one. But if you keep the new loan to the end, you pay $31,448.41 more in total, because you've added five years of payments.
| Measure | Keep current loan | Refinance |
|---|---|---|
| Monthly P&I | $1,978.98 | $1,724.01 |
| Balance after 5 years | $255,254.03 | $261,344.28 |
| Total interest to payoff | $313,694.53 | $340,642.94 |
| Payments left | 300 | 360 |
Refinance break-even calculator: two ways to measure
Simple break-even is costs divided by monthly savings: $4,500 / $254.97 is about 17.6 months. It's easy, but it treats every dollar of payment savings as money saved, even when part of it is just slower principal paydown.
Equity-adjusted break-even compares each path's payments plus the balance still owed, month by month. It finds the first month the refinance is ahead on both counts. In the example that's month 28. If you might sell or refinance again before then, the costs may not pay off.
Simple break-even (months) = net refinance costs / monthly payment savingsNet costs = points + other loan costs + payoff penalty - lender creditsPoint cost = new loan amount x points %Net savings at month n = (old payments + old balance) - (new payments + upfront costs + new balance - cash out)
Should I refinance? Term and holding period decide it
A lower rate isn't enough on its own. How long you keep the loan, and whether you restart the clock, change the answer. Here's the same $280,000 loan and $4,500 of costs, all at 6.25%:
- Matching your remaining term (25 years here) keeps the rate benefit without adding payments.
- A 15-year refinance raises the payment but saves the most, if your budget can carry it.
- Sell after two years in the 30-year case and you're $484.14 behind.
| New term | Monthly P&I | Equity break-even | Net savings at 5 years | Lifetime difference |
|---|---|---|---|---|
| 30 years | $1,724.01 | Month 28 | $4,708.17 | $31,448.41 more |
| 25 years | $1,847.07 | Month 26 | $5,965.92 | $35,072.25 less |
| 15 years | $2,400.78 | Month 22 | $11,624.91 | $157,053.40 less |
Points, lender credits and no-closing-cost offers
One discount point costs 1% of the new loan and buys a lower rate. Say the lender offers 6.00% for one point on $280,000. That's $2,800 more upfront, $7,300 in total. The payment falls to $1,678.74, simple break-even stretches to 24.3 months and the equity break-even to month 33.
Lender credits work the other way: lower upfront cost for a higher rate. A no-closing-cost refinance usually means the costs went into the rate or the loan balance. Adding $4,500 to the loan in the example raises the payment to $1,751.72 and pushes the equity break-even to month 32.
Cash-out refinance: borrowed money isn't savings
Cash out makes the new loan larger. The calculator counts the cash you receive so it doesn't look like a pure cost, but it still shows the bigger balance, higher LTV and extra interest.
If your current rate is lower than today's offer, a cash-out refinance reprices your whole balance at the higher rate. Compare it with a home equity loan, which leaves the first mortgage alone.
What the calculator doesn't model
Both loans are treated as fixed-rate and fully amortizing. The page doesn't quote rates, check approval, calculate APR or value your home. Mortgage insurance stays level for the life of each loan, so check when yours would actually end.
Taxes, homeowners insurance and escrow refunds stay outside the comparison. Line your result up against the Loan Estimate, then the Closing Disclosure, before you sign.
- Adjustable-rate, interest-only and balloon loans need a different model.
- Prepaids and escrow deposits affect cash to close but aren't borrowing costs.
- Tax treatment of points depends on your situation. See IRS Publication 936.
Sources
These CFPB, Freddie Mac and IRS resources cover refinance decisions, comparing offers, points, no-cost loans, cash out and tax rules.