Refinance Calculator — Free Online Mortgage Refinance Analyzer

How to Use the Refinance Calculator

This calculator performs a side-by-side comparison of your current mortgage against a new refinanced loan. It accounts for closing costs and shows you exactly when refinancing becomes profitable. Follow these steps for an accurate analysis.

1. Enter your current loan balance. This is the remaining principal on your existing mortgage, found on your latest monthly statement or lender portal. Do not use your original loan amount; use the current payoff balance. For example, if you borrowed $300,000 five years ago, your current balance might be approximately $265,000.
2. Input your current interest rate. Enter the annual interest rate from your existing mortgage agreement. Use the note rate (the rate on your promissory note), not the APR. If you have an adjustable-rate mortgage (ARM), enter the rate currently in effect.
3. Set the remaining term in months. Enter how many months are left on your current mortgage. If you have a 30-year mortgage and have been paying for 5 years, enter 300 (25 years × 12). You can find this on your amortization schedule or by calculating from your loan start date.
4. Enter the new loan terms. Input the proposed interest rate from your refinance offer, the new loan term in months (360 for 30 years, 180 for 15 years), and the estimated closing costs. Get closing cost estimates from at least 2-3 lenders for the most accurate comparison.
5. Analyze the results. Review the monthly payment difference, the break-even point (when cumulative savings exceed closing costs), total interest savings over the life of the loan, and the net total cost comparison. If your break-even point is shorter than your expected time in the home, refinancing is likely worthwhile.

Run multiple scenarios with different rates and terms to find the optimal refinance structure for your situation. Consider both 15-year and 30-year options to see the trade-off between monthly savings and total interest cost.

The Refinance Savings Formula

The refinance calculator computes the monthly payment for both your current and proposed loans using the standard amortization formula, then compares the total costs. Understanding these calculations helps you evaluate lender offers independently.

Where P = principal balance, r = monthly interest rate (annual rate ÷ 12 ÷ 100), and n = total number of monthly payments.

• Monthly Savings = Current Payment − New Payment
• Break-Even Months = Closing Costs ÷ Monthly Savings
• Total Interest (Current) = (Current Payment × Remaining Months) − Current Balance
• Total Interest (New) = (New Payment × New Term) − Current Balance
• Net Savings = Total Interest Saved − Closing Costs

Step-by-Step Refinance Example

Consider a $250,000 balance at 7.0% with 25 years (300 months) remaining, refinanced to 6.0% for 30 years (360 months) with $5,000 in closing costs:

1. Current payment: $250,000 × [0.005833 × (1.005833)³⁰⁰] / [(1.005833)³⁰⁰ − 1] = $1,748
2. New payment: $250,000 × [0.005 × (1.005)³⁶⁰] / [(1.005)³⁶⁰ − 1] = $1,499
3. Monthly savings: $1,748 − $1,499 = $249 per month
4. Break-even point: $5,000 ÷ $249 = 21 months (1 year 9 months)
5. Current total interest: ($1,748 × 300) − $250,000 = $274,400
6. New total interest: ($1,499 × 360) − $250,000 = $289,640
7. Net total cost comparison: Current = $524,400 vs New = $544,640 + $5,000 = $549,640

In this scenario, the monthly savings are significant ($249/month), but extending the term to 30 years increases total interest. The borrower should consider refinancing to a 25-year term instead, which would produce both monthly savings and total cost reduction.

Practical Refinance Scenarios

These examples illustrate different refinancing situations and help you evaluate whether refinancing makes sense for your specific circumstances.

Rate Drop Refinance: 7.5% to 6.0%

Angela bought her home two years ago at 7.5% on a $320,000 loan (current balance: $312,000). With rates now at 6.0%, she runs the numbers: her current payment is $2,238 and the new payment would be $1,870 on a new 30-year term with $7,800 in closing costs. That is $368 per month in savings with a break-even point of just 21 months. Since she plans to stay in the home for at least 10 more years, she will save approximately $36,000 net (after closing costs) over that period. The decision to refinance is clear in this case.

Term Shortening: 30-Year to 15-Year

James has a $200,000 balance at 6.8% with 26 years remaining (monthly payment: $1,383). He refinances to a 15-year loan at 5.8% with $4,500 in closing costs. His new payment rises to $1,670 (an increase of $287/month), but his total interest drops from $231,600 to $100,600, saving him $131,000. He pays off the loan 11 years earlier and builds equity much faster. James can afford the $287 increase because he recently paid off his car loan, freeing up that cash flow.

Marginal Rate Reduction: 6.5% to 6.0%

Tomoko has a $280,000 balance at 6.5% with 28 years remaining and is offered 6.0% with $6,000 in closing costs. Her monthly payment drops from $1,814 to $1,679, saving $135 per month. The break-even point is 44 months (3 years 8 months). If she plans to move within 3 years, refinancing does not make financial sense because she will not recoup the closing costs. However, if she plans to stay 5+ years, the net savings of approximately $2,100 over 5 years makes it marginally worthwhile. She decides to negotiate closing costs lower or request a no-closing-cost option.

ARM to Fixed Rate Conversion

Robert has a $240,000 adjustable-rate mortgage currently at 5.5% that is about to adjust upward. His lender indicates the new rate could be 7.5-8.0% based on current market conditions. He locks in a 30-year fixed rate at 6.25% with $5,500 in closing costs. While 6.25% is higher than his current 5.5%, it provides payment stability: his fixed payment of $1,478 per month is guaranteed for 30 years, compared to the potential $1,678-$1,797 if his ARM adjusts to 7.5-8.0%. The certainty of a fixed payment allows him to budget accurately and eliminates the stress of rate adjustments.

Refinance Tips and Complete Guide

Refinancing your mortgage can save tens of thousands of dollars over the life of your loan, but it requires careful analysis and timing. Use these strategies to maximize your savings and avoid common pitfalls.

Shop Multiple Lenders

Rates and closing costs vary significantly between lenders. Get quotes from at least three to five lenders including your current lender, a large national bank, a credit union, and an online lender. Each Loan Estimate (provided within 3 business days of application) uses a standardized format, making direct comparison straightforward. The difference between the best and worst offer can be 0.25-0.5% in rate and thousands of dollars in fees.

Improve Your Credit Score First

Your credit score is the single biggest factor in the rate you qualify for. A score of 760 or higher typically qualifies you for the best rates, while scores between 620 and 700 may add 0.5-1.5% to your rate. Before applying, pay down credit card balances below 30% of limits, dispute any errors on your credit report, and avoid opening new credit accounts. Even a 40-point improvement can meaningfully lower your rate offer.

Consider the Full Picture

Monthly savings do not tell the whole story. Extending your term (for example, from 25 years remaining to a new 30-year loan) reduces your monthly payment but may increase total interest paid. Always compare the total cost of each scenario, not just the monthly payment. The ideal refinance reduces both your monthly payment and your total cost. If that is not possible, prioritize whichever goal matters more to you: cash flow relief (lower payment) or wealth building (lower total cost).

Lock Your Rate at the Right Time

Once you receive an attractive rate quote, lock it in immediately. Rate locks typically last 30-60 days and protect you from rate increases during the closing process. If you believe rates may drop further, some lenders offer float-down provisions that let you take advantage of lower rates during the lock period (usually for a fee). Watch the Federal Reserve announcements and mortgage rate trends to time your application strategically.

Common Mistakes to Avoid

• Ignoring the break-even point. The most common refinance mistake is focusing only on the lower monthly payment without calculating how long it takes to recoup closing costs. If your break-even point is 36 months but you plan to sell in 24 months, refinancing loses money. Always calculate the break-even first.
• Resetting to a 30-year term without considering alternatives. Refinancing a loan with 22 years remaining into a new 30-year loan adds 8 years of payments. Consider matching or shortening your term. A 20-year or 25-year refinance may offer similar monthly savings with much less total interest.
• Not accounting for all costs. Beyond closing costs, consider the time and effort involved in the refinance process, potential prepayment penalties on your current loan (rare but possible), and the cost of a new appraisal if your home value has decreased. Our mortgage amortization calculator shows exact interest costs for any loan scenario.
• Cash-out refinancing for non-essential purposes. Taking cash out through refinancing increases your loan balance and interest costs. While it can make sense for home improvements that increase property value or to consolidate very high-interest debt, using a cash-out refinance for vacations, cars, or discretionary spending converts short-term expenses into 30 years of interest payments.
• Refinancing too frequently. Each refinance has closing costs. Refinancing every time rates drop by 0.25% rarely makes financial sense because the closing costs eat into the savings. Wait for a meaningful rate reduction (typically 0.75-1.0% or more) before refinancing again.