🔄 Mortgage Refinance Calculator
Compare your current loan vs. new loan to see if refinancing will save you money
How This Calculator Works
This calculator compares your current mortgage to a potential refinance to determine if refinancing saves money. It calculates three critical metrics: Monthly savings (new payment vs. old payment), break-even point (months to recover closing costs through monthly savings), and total interest savings over the remaining loan life.
The math is straightforward: If your monthly savings × months you'll stay in the home exceeds closing costs, refinancing wins. Closing costs typically run 2-5% of loan amount ($5k-$10k for a $250k loan). Your break-even is closing costs ÷ monthly savings. If you'll own the home past break-even, refinance. If you're selling soon, skip it.
The calculator also shows lifetime interest savings - refinancing from 7% to 6% on a $250k balance can save $50k+ in interest over 25 years. Even small rate drops compound to huge savings over decades.
Example Calculation
Real-World Example: Refinance Decision
Current Loan: $250,000 remaining balance, 7% interest rate, 25 years remaining. Current payment: $1,767/month
Refinance Option: Same $250k balance, 6% new rate, 25-year term, $5,000 closing costs. New payment: $1,611/month
Monthly Savings: $1,767 - $1,611 = $156/month saved
Break-Even Point: $5,000 closing costs ÷ $156/month = 32 months (2.7 years)
Decision: If you'll stay in the home 3+ years, refinance. If selling in 2 years, the $3,744 in monthly savings (24 × $156) doesn't cover the $5,000 closing costs - skip refinancing.
Lifetime Savings: Over 25 years, 6% vs 7% saves approximately $47,000 in interest. That's the true win if you stay long-term.
Common Questions
What rate drop makes refinancing worthwhile?
The old rule was "1% drop minimum," but with today's lower closing costs and longer homeownership periods, even 0.5-0.75% can be worth it. Use our calculator with your specific numbers - break-even is what matters, not a generic rule. If you'll stay past break-even (typically 2-4 years), refinance. Closing cost amount is more important than rate drop percentage. Shop lenders - costs vary widely ($3k to $10k for the same loan).
Should I refinance to a shorter term or lower payment?
Two strategies: Lower payment: Refinance 30-year to new 30-year at lower rate. Reduces monthly cost, improves cash flow. Shorter term: Refinance 30-year to 15-year to pay off faster and save massive interest, but higher monthly payment. Example: $250k at 7% for 30 years = $598k total. Refinance to 6% for 15 years = $379k total, saving $219k but paying $559 more monthly ($1,611 vs $2,170). Choose based on your goal: cash flow flexibility or wealth building speed.
Can I roll closing costs into the loan?
Yes, but you shouldn't if avoidable. Rolling $5k closing costs into your loan means you pay interest on those $5k for 15-30 years - turning $5k into $8-12k in true cost. Only roll costs in if you're cash-strapped but have strong reasons to refinance (like escaping an ARM that's about to adjust). Better: Pay closing costs from savings and keep loan amount lower. Some lenders offer "no-closing-cost" refis - they charge a slightly higher interest rate to cover costs. That can work if you'll move/refinance again within 5-7 years.