Mortgage Refinance Calculator

The break-even point is the number of months you must keep the refinanced loan before your cumulative monthly savings exceed the upfront closing costs. The formula is: break-even months = closing costs ÷ monthly savings. If closing costs are $6,000 and you save about $346 per month, you break even in about 18 months. If you sell or refinance again before then, the refinance costs more than it saves.

The standard fully-amortizing fixed-rate formula is M = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is your outstanding balance, r is the monthly rate (annual rate ÷ 12) and n is the new term in months. For example, $250,000 at 5% for 30 years: r = 0.05/12 ≈ 0.004167, n = 360, M ≈ $1,342.05.

Refinance closing costs typically run 2%–6% of the outstanding loan principal. On a $250,000 balance that is roughly $5,000–$15,000. Common line items include loan origination fees, appraisal, title search and insurance, attorney fees and prepaid interest. Your lender is required to give you a Loan Estimate within three business days of application so you can compare the real cost.

It depends on the closing costs and how long you plan to stay. At $200/month savings with $5,000 in closing costs, you break even in 25 months (about two years). If you plan to keep the home well beyond that, the refinance is likely worthwhile. But also check the total cost: if the new loan extends your term significantly, you could pay more interest overall despite the lower monthly payment.

Yes. A new 30-year refinance resets to 360 monthly payments and restarts amortization from scratch, meaning early payments are mostly interest again. Even if your new rate is lower, extending the term can increase total interest paid. This calculator shows both the monthly savings and the lifetime savings so you can see the full trade-off, not just the monthly payment.

Refinancing is likely not worth it when: (1) the monthly savings are too small to recover closing costs before you move or sell; (2) you are already far into your loan term — resetting amortization means paying interest-heavy early payments again; (3) your new rate is not meaningfully lower than your current rate; or (4) you plan to sell within a year or two. This calculator’s break-even and lifetime-savings figures help you identify these situations.

Prepayment means making extra payments on your existing loan to pay it down faster — it reduces your remaining term or payment without changing the loan’s interest rate or opening a new loan. Refinancing replaces your current loan with a new one at a (hopefully lower) rate, new term and closing costs. Prepayment saves you the most when you have a high balance early in the loan; refinancing is best when market rates have dropped significantly below your current rate.

Yes, many lenders let you add closing costs to the new loan principal instead of paying them out of pocket. However, this increases the new payment (because the principal is higher) and reduces your monthly savings, which pushes the break-even point further out. This calculator assumes closing costs are paid upfront; if you roll them in, increase the new loan balance by that amount to model it accurately.

The savings figure is simply your current monthly P&I payment minus the new monthly P&I payment, both computed with the standard amortization formula. Taxes, insurance and escrow are the same under both loans and cancel out — only the P&I changes. This calculator computes savings from unrounded payment amounts before rounding for display, so the figures are accurate to the cent.

Lifetime savings = (current monthly payment × remaining months on the old loan) − (new monthly payment × new loan term in months) − closing costs. A positive number means the refinance saves you money over the life of both loans. A negative number means the refinance costs more overall, typically because the new term is much longer than the remaining old term even though the monthly payment is lower.

There is no universal rule, but a commonly cited guideline is at least a 0.75%–1% rate reduction. At lower balances or with high closing costs, you may need a larger drop to break even in a reasonable time. At higher balances (e.g. $500,000+), even a 0.5% drop can generate hundreds in monthly savings and break even quickly. The break-even calculator above is more reliable than any rule of thumb.

Not necessarily. If you extend the loan term when you refinance — for example, going from 10 years remaining at 6% to a fresh 30-year at 4.5% — the lower rate is more than offset by paying interest for 20 additional years. Always check the lifetime-savings figure, not just the monthly payment, before deciding.

The three main types are: (1) Rate-and-term refinance — you keep the same loan balance but get a new interest rate, a new term, or both; the most common type and what this calculator models. (2) Cash-out refinance — you borrow more than you currently owe and take the difference as cash, typically to fund home improvements or consolidate debt; the new balance is higher so the monthly saving is smaller or may turn negative. (3) ARM-to-fixed refinance — you convert an adjustable-rate mortgage to a fixed rate to eliminate future rate-reset risk; useful when you plan to stay long-term and rates are still reasonable.

Yes, in certain cases. If your home has appreciated and your new loan balance is 80% or less of the current appraised value, you may refinance into a conventional loan without PMI. FHA loans carry MIP (mortgage insurance premium) for the life of the loan regardless of equity — refinancing into a conventional loan once you have 20% equity is the standard way to remove it. PMI removal can add meaningfully to your monthly savings beyond the rate reduction alone, but this calculator does not model the PMI/MIP component; factor it into your monthly savings estimate manually.

For most homeowners, yes — mortgage interest on a rate-and-term refinance remains deductible under IRS rules, subject to the same limits that apply to the original loan. Since the 2017 Tax Cuts and Jobs Act, the deduction is capped on acquisition debt up to $750,000 ($375,000 if married filing separately). For a cash-out refinance, only the interest on the portion used to buy, build, or substantially improve the home qualifies — interest on cash taken out for other purposes (debt consolidation, vacations) is not deductible. This calculator does not model the tax impact; consult a tax adviser for your specific situation.