Mortgage Refinance Calculator

Refinance offers lead with a lower monthly payment, and that payment is often real. What the headline leaves out is the new term clock and the closing costs paid to get the lower rate. A refinance replaces your current loan with a new one, usually over a fresh 30 year term. If you are ten years into a 30 year loan and refinance into another 30 year loan, you have signed up for forty years of payments on the same home unless you pay extra principal along the way. The payment falls in part because the debt is stretched, not only because the rate improved.

That does not make refinancing a bad move. When the rate drop is large, when you shorten the term, or when you remove PMI or move from an adjustable rate to a fixed rate, a refinance can save substantial money and reduce risk. The job of this calculator is to separate a genuine saving from a payment illusion. Use the comparison view, enter your current balance, rate, and years left as one scenario, then enter the refinance balance, the offered rate, and the new term as the other. Add closing costs to the new loan side of your notes and work through the break-even math below before you decide.

For a deeper tool built only for this question, use the mortgage refinance break-even calculator after you run the basic comparison here. This page teaches the full comparison, including total remaining cost. The break-even tool focuses on the single number most borrowers need first: how many months until the refinance pays for itself.

The table below uses the worked example figures. Read the payment line and the total cost line together. One without the other will mislead you.

In this example total interest falls even though the term stretches by five years, because the hypothetical rate drop from 7.0% to 5.5% is large. That outcome is not automatic. With a smaller rate drop, the extra sixty payments would outweigh the lower rate and total interest would rise while the monthly payment still fell. That is why the total cost line matters: it catches the cases where a lower payment hides a more expensive loan.

To compare total remaining cost directly, multiply each payment by the months left and add closing costs to the new loan. Current loan: $2,120.34 times 300 months. Refinance: $1,703.37 times 360 months, plus $6,000. The loan with the lower total is the cheaper loan if you hold it to payoff. If you expect to move or refinance again, weight the break-even point more heavily, because total cost to payoff assumes you keep the loan for its full term.

The clock reset. Every refinance into a new 30 year term restarts the amortization schedule, where early payments are mostly interest. If you have paid a loan down for ten years, you have reached the part of the schedule where principal falls faster. A new loan throws that progress back to the slow start. Mitigations include choosing a 20 or 25 year term, or keeping the old payment amount and sending the difference to principal on the new loan. Either approach preserves much of the rate benefit without accepting a forty year total payoff horizon.

Cash-out caution. A cash-out refinance borrows against equity for debt payoff, repairs, or other needs. The payment comparison gets harder because the new balance is larger than the old one, so the payment may rise even at a lower rate. Ask what the cash is for and what it costs over the full term. Borrowing for a roof that protects the home is a different decision from borrowing for spending that will be gone in a year while the debt runs for thirty. In both cases, the equity you built becomes a balance you owe again.

Term choice is a lever, not a default. Lenders quote 30 year refinances because the payment looks lowest. A 15 or 20 year refinance often carries a lower rate and ends far sooner, at the cost of a higher payment now. Run all three terms in the comparison view with your own balance and offered rates. The right term is the one where the payment fits in a bad month and the total cost is lower than staying with your current loan.

1. Judging by monthly payment only. A longer term lowers the payment even at the same rate. Always compare total remaining cost and the payoff date, not just the monthly figure in the offer letter.
2. Ignoring closing costs or rolling them in without noticing. Costs paid in cash and costs added to the balance are both real. If costs are rolled in, your new balance is higher than your old balance and every interest figure rises with it.
3. Refinancing right before a move. If you sell before the break-even point, the closing costs are never recovered. Match the refinance decision to how long you honestly expect to keep the home and the loan.
4. Resetting to 30 years late in a loan without a plan. Near the end of a loan most of each payment is principal. Restarting at 30 years trades that progress for a low payment that is mostly interest again. A shorter new term or extra principal can offset the reset.
5. Chasing a small rate drop on a small balance. When little is owed, the dollar saving per month is small and break-even stretches for years. The math, not the rate headline, should decide.
6. Using cash-out funds without a total cost check. Cash at closing feels like a gain. It is a loan increase. Compare the new total cost, including interest on the cash portion over the full term, before you spend it.

First, write down your current loan facts: balance, rate, monthly principal and interest, and years left. Your servicer statement or online account shows all four. Second, collect written Loan Estimates for the refinance, including the rate, term, and an itemized closing cost total. Enter both loans in the comparison view above and record the payment saving. Third, compute break-even by dividing closing costs by the monthly saving, and ask whether you will keep the loan well past that date. Fourth, compute total remaining cost for both loans and confirm the refinance is cheaper on that basis too, or understand exactly why you accept a higher total, for example to fix an adjustable rate or to shorten the term.

Refinancing is usually a bad idea when you plan to move soon, when the balance is small, when closing costs are high relative to the saving, or when the only benefit is a lower payment created by stretching the term. It is usually a strong candidate when the rate drop is meaningful, you plan to stay past break-even, the new term does not undo years of progress, and total remaining cost falls by a clear margin. If the numbers are close either way, keep the current loan. A refinance you have to hope works out rarely beats a loan you already understand. When you want the break-even figure on its own, run the dedicated refinance break-even calculator with your costs and saving.