How this refinance calculator works
A refinance replaces your current mortgage with a new one. You pay closing costs to get a lower rate or a lower payment, so the real question is how long it takes for the savings to repay those costs, and whether you will still own the loan by then.
The calculator compares two paths month by month, using standard fixed-rate amortization:
- Keep your current loan. Your payment is computed from your balance, rate and remaining years.
- Refinance. The new payment is computed from the new balance (plus the closing costs if you roll them in), the new rate and the new term.
Net benefit at month m = (payments made on the current loan + balance still owed on it) − (closing costs paid up front + payments made on the new loan + balance still owed on it).
Counting the balance still owed is what makes the comparison fair. A new 30-year loan can lower your payment simply because it stretches the balance over more years, and that effect shows up as a higher balance left to pay, not as a hidden gain.
How to read the results
- Break-even month. The first month from which the net benefit stays at or above zero. If you will keep the loan longer than that, the refinance pays for itself.
- Simple break-even. Closing costs divided by the monthly savings. It is quick to estimate by hand but ignores the balance effect, so it can look better than the full result when you extend the term.
- Net result at your horizon. How far ahead or behind you would be on the date you expect to sell or pay off.
- Lifetime interest. The interest you would pay over the full remaining life of each loan, before closing costs. A longer new term often raises it even when the payment falls.
Common mistakes this calculator helps you avoid
- Judging by the monthly payment alone. A lower payment can cost more overall once the term resets.
- Ignoring how long you will stay. A refinance that breaks even in 4 years does not help if you sell in 2.
- Forgetting rolled-in costs. Financing the closing costs avoids cash at closing but adds interest on that amount.
- Using a guessed closing-cost figure. Compare actual Loan Estimates from several lenders. They are standardized, which makes the costs easy to line up.
For the full decision framework, including when to wait and what to check on a Loan Estimate, read our guide Should you refinance your mortgage? Break-even point and closing costs.
Frequently asked questions
What is the break-even point on a refinance?
It is the number of months it takes for your savings to repay the cost of refinancing. Before that month you are behind; after it you are ahead, as long as you keep the new loan. This calculator finds the month from which your cumulative position stays at or above zero.
Is a refinance worth it if I plan to move in a few years?
Only if the break-even month comes before the date you expect to sell or pay off the loan. Enter the number of years you expect to keep the loan, and the result tells you whether you would be ahead or behind at that point.
Should I roll closing costs into the new loan?
Rolling them in means no cash at closing, but you borrow and pay interest on the extra amount, so your balance starts higher. Switch the option in the calculator to compare both approaches with the same rate and term.
What happens if I choose a longer term than the one I have left?
Your monthly payment usually falls, but you may pay more interest over the life of the loan. Compare the lifetime interest figures and the net benefit at the end of the chart, not only the monthly savings.
Which closing costs should I enter?
Use the total shown on the Loan Estimate your lender gives you, which lists loan costs and other costs. Until you have one, the 2%, 3% and 4% buttons give a rough placeholder, so replace it with the real figure as soon as you can.
What does this calculator leave out?
It covers principal and interest only. It does not include property taxes, homeowners insurance, mortgage insurance, escrow changes, tax deductions, the value of money over time, or any cash taken out. Treat the result as a first filter, then compare real Loan Estimates.
Sources
- CFPB: Loan Estimate explainer
- CFPB: What costs come with taking out a mortgage?
- CFPB: Is there such a thing as a no-cost or no-closing cost loan or refinancing?
This tool is for general information and illustration. It is not personalized advice. Confirm the figures with a qualified professional. See our editorial standards.
