How to use this refinance calculator
- Current loan — the balance you still owe, its interest rate, and the time left until it is paid off. The calculator works out your current principal-and-interest payment from these.
- New loan — the rate you have been offered and the term you would take.
- Closing costs — the total fees to refinance. Tick the box if they will be added to the new loan instead of paid upfront.
The results compare the two loans from today onward. Open the side-by-side comparison for a summary table or the balance of each loan year by year. It works for any fixed-rate loan, though most people use it for a mortgage.
How the calculator works
Both payments use the standard amortized loan formula, and the comparison follows from them:
The break-even point is how many months of lower payments it takes to earn back the closing costs. If the new payment is not lower, there is no break-even point, and the calculator says so. Net savings is the bigger picture: everything you would pay from today on the current loan, minus everything you would pay on the new one.
Worked example
These are the calculator’s default inputs: a $265,000 balance at 7.25% with 24 years left, refinanced at an illustrative 6.125% over 25 years, with $5,500 of closing costs paid upfront.
- Current payment: $1,944.05 a month. New payment: $1,727.70, which is $216.35 less.
- Break-even: $5,500 ÷ $216.35 = 25.4, so 26 months (2 years 2 months).
- Interest left on the current loan: $294,887. Interest on the new loan: $253,311.
- Net savings: $294,887 − $253,311 − $5,500 = $36,076.
So refinancing pays off here, even though the new loan runs one year longer than the old one. You need to keep the new loan for at least 26 months to come out ahead.
A longer term can lower the payment and raise total interest
Resetting to a long term spreads the balance over more months, so the payment falls — but you pay interest for longer. For the same $265,000 at 6.125% with $5,500 of costs:
| New term | New payment | Total interest | Net savings |
|---|---|---|---|
| 15 years | $2,254.16 | $140,748 | $148,639 |
| 20 years | $1,917.70 | $195,248 | $94,139 |
| 25 years | $1,727.70 | $253,311 | $36,076 |
| 30 years | $1,610.17 | $314,660 | −$25,273 |
The 30-year loan has the lowest payment and the fastest break-even, at 17 months, yet it costs $25,273 more than keeping the current loan, because it adds six years of payments. The 15-year loan raises the payment, so it has no break-even point, but it saves the most of the four. A fast break-even alone does not mean a refinance is a good deal. For more on this trade-off, read 15 vs. 30-year mortgage.
Paying closing costs upfront or adding them to the loan
Adding the costs to the loan means no cash at closing, but you pay interest on them. In the example, rolling the $5,500 into the loan raises the new payment to $1,763.56, pushes break-even out to 31 months, and cuts the net savings to $30,819.
What this calculator does not include
- Property tax and home insurance, which usually stay much the same after a refinance, or mortgage insurance, which can change with a new loan.
- Cash-out refinancing, adjustable rates, and extra payments on either loan.
- Discount points shown separately. Include any points in the closing costs and use the rate they buy.
- Prepayment penalties on your current loan, and any tax effects.
It assumes both loans have fixed rates, are paid monthly to the end of their terms, and that the current balance and time left are accurate. To see how a rate turns into monthly interest, read how loan interest is calculated.
Frequently asked questions
How long do I need to stay for a refinance to pay off?
At least until the break-even point: 26 months in the example. If you might sell or refinance again before then, the closing costs will likely outweigh the lower payments.
Why is my current payment different from my statement?
Your statement may include property tax and insurance held in escrow. This calculator compares principal and interest only, which is the part a refinance changes. Small differences can also come from rounding by your lender.
Should I compare the rate or the APR?
Enter the interest rate here and the closing costs separately. Use the APR to compare offers from different lenders, since it folds most fees into one yearly figure. Our guide to APR vs. interest rate explains the difference.
Can I get a lower payment without paying more interest?
Choose a term close to the time left on your current loan. In the example, a 25-year loan against 24 years left lowers the payment by $216.35 and still saves $36,076. Use the mortgage calculator to see your full monthly housing cost afterward.
Can I save my calculation?
Members can save any calculation and reopen it later from their account. The calculator itself is free for everyone, with instant results and no sign-up. See membership.
Results are estimates for educational purposes and are not financial advice. See our disclaimer.