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Mortgage Refinance Calculator – Break-even Point and Savings

Find out if refinancing your mortgage is worth it. Compare your current payment with a new loan, see how many months it takes for the monthly saving to repay the closing costs, and check whether you save money over the whole life of the loan.

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How to use the refinance calculator

  1. Enter the remaining balance on your current mortgage.
  2. Enter your current interest rate and the years left on the loan.
  3. Enter the new interest rate you’ve been offered and the new loan term.
  4. Enter the closing costs for the new loan.

The result shows your new monthly payment and saving, the break-even point, the interest left on your current loan, the total interest on the new loan and the lifetime saving after closing costs.

How the numbers are worked out

Both payments use the standard mortgage formula:

Payment = B × r × (1 + r)^n ÷ ((1 + r)^n − 1)

Then:

Break-even (months) = Closing costs ÷ (Current payment − New payment)
Lifetime saving = Total left to pay now − (Total of new payments + Closing costs)

Worked example

You owe $280,000 at 7.5% with 26 years left. A lender offers 6.25% for 30 years with $6,000 closing costs.

  • Current payment ≈ $2,042.34
  • New payment ≈ $1,724.01 — a saving of about $318.33 a month
  • Break-even ≈ 19 months
  • Interest left on the current loan ≈ $357,210; on the new loan ≈ $340,643
  • Lifetime saving after closing costs ≈ $10,567

The saving is smaller than the monthly figure suggests because the new loan runs four years longer. A 25-year new term would save much more interest in total, at a higher monthly payment.

Reasons people refinance

  • Lower rate — the most common reason when market rates fall.
  • Lower payment — to free up monthly cash, sometimes by taking a longer term.
  • Shorter term — moving from 30 to 15 years to pay off sooner and save interest.
  • Switch from adjustable to fixed — for a predictable payment.
  • Remove PMI — if your home has gained value and you now have 20% equity.
  • Cash out — borrowing against equity for renovations or to consolidate debt.

Before you refinance

  • Check your credit score; the best rates go to the highest scores.
  • Get several loan estimates and compare APRs, not just rates — the APR calculator shows how fees change the real cost.
  • Ask about no-closing-cost options, which usually mean a slightly higher rate.
  • Think about how long you’ll stay. If you might move within the break-even period, the costs may outweigh the saving.
  • Keep your payoff date by choosing a matching term or paying a little extra each month.

Outside the US

In the UK and much of Europe, people usually “remortgage” at the end of a fixed-rate deal. Early repayment charges can be large during the fixed period, so add them to the closing costs. The calculator works in any currency.

Model your current loan in full with the mortgage calculator or compare owning with renting using the rent vs buy calculator. These are estimates, not loan offers — see our disclaimer.

Frequently asked questions

When is refinancing worth it?

When you’ll keep the new loan longer than the break-even period — the months it takes for your monthly saving to cover the closing costs — and when the total cost of the new loan, including closing costs, is lower than what you have left to pay on the old one.

How is the break-even point calculated?

Closing costs ÷ monthly saving. With $6,000 of costs and a saving of $318 a month, break-even is 19 months. If you might sell or move before then, refinancing probably won’t pay off.

Why can refinancing cost more even with a lower rate?

If you reset to a new 30-year term, you pay interest for more years. The payment drops, but the total interest can rise. Choosing a shorter new term — or keeping your old payoff date by paying extra — avoids this.

How much lower should the new rate be?

There is no fixed rule. Some people use “at least 0.75 to 1 percentage point lower”, but the break-even and lifetime numbers in this calculator are a better guide because they use your actual balance and costs.

What closing costs should I include?

Lender origination fees, points, appraisal, title insurance, recording fees, attorney or settlement fees and any prepayment penalty on your current loan. Lenders must show these on the loan estimate.

Does this work for a cash-out refinance?

Enter your current balance as the remaining balance, then compare. For cash-out, the new loan is larger, so use the loan calculator to see the new payment on the bigger amount.

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