Refinance Calculator
Should you refinance your mortgage?
Overview
The Refinance Calculator helps you determine if refinancing makes financial sense. It compares your current loan with a new loan to calculate potential savings and the break-even timeline for recouping closing costs.
Best Used For
Inputs
The calculator accepts the following input fields:
| Field | Type | Description | Default |
|---|---|---|---|
| Current Balance | currency | Remaining mortgage balance | $300,000 |
| Current Rate | percentage | Your current interest rate | 7.5% |
| Remaining Term | number | Years left on current loan | 25 years |
| New Rate | percentage | New loan interest rate | 6.5% |
| New Term | select | New loan term | 30 years |
| Closing Costs | currency | Estimated refinance costs | $6,000 |
Outputs
The calculator returns the following results:
| Output | Description |
|---|---|
| Monthly Savings | Reduction in monthly payment |
| Break-Even Point | Months until costs are recovered |
| Lifetime Savings | Total savings over the loan term |
| New Payment | Monthly payment after refinancing |
How It Works
Refinance Analysis Formulas
Monthly Savings = Current Payment − New Payment
Break-Even (months) = Closing Costs ÷ Monthly Savings
Lifetime Savings = (Monthly Savings × New Term Months) − Closing Costs
Typical Break-Even by Rate Reduction
The larger the rate reduction, the faster you'll recover closing costs:
| Rate Reduction | Typical Break-Even | Recommendation |
|---|---|---|
| 0.25% | 36-48 months | Only if staying 4+ years |
| 0.50% | 18-24 months | Good if staying 2+ years |
| 1.00% | 9-12 months | Strong candidate |
| 1.50%+ | 6-9 months | Excellent opportunity |
Key Considerations
Rate vs. Term
A lower rate saves interest, while a shorter term builds equity faster but has higher payments.
Closing Costs
Typically 2-5% of loan amount. Some lenders offer no-cost refinances with slightly higher rates.
Time in Home
Must stay long enough to recoup closing costs. If selling soon, refinancing may not make sense.
Cash-Out Option
Accessing equity increases your loan balance and total interest paid over time.
Example Scenario
A homeowner with $300,000 remaining at 7.5% considering refinancing to 6.5% with $6,000 in closing costs.
Inputs
Results
Explanation
Refinancing saves $234/month with a 26-month break-even. If staying 5+ years, lifetime savings exceed $78,000. The new 30-year term extends payments but provides flexibility with a lower monthly payment.
Try the Refinance Calculator
Calculate your potential savings and break-even timeline.
Open Calculator