Refinance calculator

How it works

A refinance replaces one mortgage with another. The useful question is not only whether the new payment is smaller, but whether the interest you stop paying on the old loan outweighs the interest and fees you take on with the new one. This calculator runs two amortizing schedules side by side: the loan you have, for the years you still owe, and the loan you would open, for the new rate and term.

Closing costs are the cash (or financed) price of making that swap — origination, title, recording, prepaid interest, and similar items listed on a Closing Disclosure. If you pay them in cash, they are subtracted from lifetime interest savings to produce a net figure, and they set the break-even clock: months of payment reduction needed to recoup that cash. If you roll them into the new loan and the payment still falls, break-even is shown as “Immediate (costs financed)” because there is no cash outlay to recoup — the fee is in the new balance. If the payment does not fall, the tool reports that there is no cash to recoup.

A lower rate with a reset 30-year term can cut the monthly bill and still cost more interest over the new full term, because you start amortization over. A shorter new term can raise the payment and still save interest. The lifetime number is there to keep those two effects from hiding each other.

The CFPB’s Owning a Home pages on exploring options, comparing offers, and closing are the right place to read a real Loan Estimate. This page only does the arithmetic of one current loan versus one replacement loan.

The formula

Each schedule uses the same payment identity as the mortgage calculator, with r = APR ÷ 12 and n = months. The current loan uses remaining balance, current rate, and years left. The new loan uses remaining balance plus rolled-in costs (if you choose that), the new rate, and the new term.

M = P × r / (1 − (1 + r)^−n)
monthly savings = current P&I − new P&I
break-even months = ceil(cash closing costs ÷ monthly savings); Immediate (costs financed) when costs are rolled in
lifetime savings = old interest − new interest − cash closing costs

A negative monthly savings figure means the new payment is higher. If savings are not positive, there is no payment-based break-even. Rolled-in costs are not subtracted again as cash; they show up as a larger new principal and therefore more new interest.

Taxes, insurance, and PMI are omitted from both sides so the comparison isolates the note. If a refinance also removes PMI or changes escrow, add that effect separately. The Federal Reserve H.15 release and FRED’s 30-year mortgage average describe the rate environment; they are not a lock.

Worked example

You also added three years of scheduled payments, which is why the interest gap is smaller than “a full point times 30 years” folklore would suggest.

If those $6,000 are rolled in, the new principal is $306,000. The new payment rises relative to the cash-outlay case, break-even becomes “Immediate (costs financed)” if the payment still falls (no cash to recoup), and lifetime savings shrink because you are financing the fee. That trade-off is the point of the checkbox.

These figures come from the two schedules. They are not an industry average savings claim, and they ignore discount points, credits, and cash-out amounts you did not enter.

Assumptions and limits

Both loans are fixed-rate and fully amortizing. The tool does not model cash-out (except the roll-in of closing costs), temporary buydowns, ARMs, or a change in occupancy. It does not apply a prepayment penalty on the old loan or a new PMI layer on the replacement.

“Years left” should be the remaining amortization, not the time since origination. If you have already made extra principal payments, use the current balance from your servicer and the remaining term on the original note, or the remaining term after recast if you have one.

Break-even counts only P&I reduction versus cash closing costs. It does not discount future dollars, include moving plans, or credit tax effects. IRS Publication 936 describes when points on a refinance are deducted over the life of the loan rather than in the year paid.

Ability-to-repay and qualified-mortgage rules in 12 CFR 1026.43 still apply to a refinance in most cases. A lower payment does not by itself mean a lender must approve the new loan.

This is an educational comparison, not a recommendation to refinance and not financial advice. Confirm costs on a Loan Estimate and Closing Disclosure before you lock or apply.

Frequently asked questions