About this Refinance Calculator
Refinancing replaces your current mortgage with a new one, ideally with a lower interest rate. However, refinancing costs money (closing costs). This calculator helps you determine if the long-term savings outweigh the upfront cost.
Who this calculator is for
- Homeowners deciding whether a lower rate is worth the closing costs.
- Borrowers comparing payment relief against how long they expect to keep the home.
- Anyone evaluating refinance offers before calling a lender or broker.
When to use it
- Use this tool when you receive a refinance quote and need a fast break-even estimate.
- Compare different rate offers to see how much monthly payment relief each one creates.
- Use it alongside the amortization and mortgage calculators to understand both cash-flow and lifetime-interest tradeoffs.
How to use this calculator
- Enter your Current Loan Balance.
- Enter your Current Interest Rate.
- Enter the New Interest Rate and Term offered.
- Input the Closing Costs (Fees) for the new loan.
Key assumptions
- The current and new loans are modeled over the same term for a simple apples-to-apples payment comparison.
- Closing costs are paid upfront and recovered only through monthly payment savings.
- Lifetime savings assumes you keep the refinanced loan long enough for the modeled savings to occur.
Accuracy and testing
Review formula sources, default test cases, assumptions, unit handling, rounding rules, and changelog for this calculator.
How this calculator works
Inputs explained
Loan Balance
The amount you still owe on your house today. Do not enter the original loan amount.
Closing Costs
Fees charged by the lender to process the new loan. Typically 2-5% of the loan amount.
Loan Term
The duration of the new loan. Switching from a 30-year to a 15-year will likely increase your monthly payment but save massive interest.
Understanding your results
Example scenarios
Clear Win
Refinancing $300k from 7% to 5.5% saves ~$300/mo. If costs are $4,000, you break even in 13 months.
Long Break-Even
Refinancing to save $50/mo with $5,000 in closing costs takes 100 months (8+ years) to break even. Probably not worth it.
Key Features
- Break-Even timeline
- Lifetime Interest Savings
- Monthly Cash Flow Comparison
Things to Keep in Mind
Assumes you keep the loan for its full term for lifetime savings calculation. Does not account for investing the monthly savings.
Tips & Best Practices
- If you extend your term (e.g. restart a 30-year loan after paying for 5 years), your monthly payment drops, but you might pay MORE total interest over time.
- Consider a 'No-Closing-Cost' refinance where the lender credits the fees in exchange for a slightly higher rate.
Glossary of Terms
- Break-Even Point
- The moment when the money saved on monthly payments equals the upfront cost of refinancing.
- Rate and Term Refinance
- Changing the interest rate or loan term without taking cash out.
- Cash-Out Refinance
- Taking a larger loan than you owe to pocket the difference in cash.