Typically 2-5% of loan amount
Disclaimer
This tool provides estimates for educational purposes only and is not financial or tax advice. Results do not account for your full financial situation, credit score impact, PMI changes, variable-rate scenarios, or state-specific closing costs. Consult a qualified mortgage professional and tax advisor before making refinancing decisions.
How this is calculated
Refinancing replaces your current mortgage with a new loan at a different rate and term. The calculator follows standard amortization math used by lenders:
- Monthly payment = P × [r(1+r)^n] / [(1+r)^n − 1], where P = loan balance, r = monthly rate, n = number of payments.
- Current loan: uses your remaining balance, current rate, and remaining term.
- New loan: uses the same balance at the new rate with the new term, plus closing costs added to total cost.
- Monthly savings = current payment − new payment.
- Breakeven months = closing costs ÷ monthly savings. This is how long until the savings pay for the refinance.
- Net savings = total interest savings − closing costs. If positive, refinancing is beneficial over the new loan term.
Worked example: A $250,000 balance at 7.5% with 25 years remaining has a monthly payment of ~$1,842. Refinancing at 6.0% for 30 years drops the payment to ~$1,499 — saving $343/month. With $5,000 in closing costs, breakeven is ~15 months. Total interest savings over the new 30-year term: ~$48,000, minus $5,000 closing costs = ~$43,000 net savings.
Sources
- CFPB — Mortgage Refinance Guide
- Freddie Mac — Primary Mortgage Market Survey (current rates)
- IRS Publication 936 — Home Mortgage Interest Deduction
Reviewed against 2026 figures · Last updated June 11, 2026 · Written by Zhisán
What is Refinance Calculator?
Refinancing replaces your current mortgage with a new loan, typically to secure a lower interest rate, reduce monthly payments, switch from an adjustable-rate to a fixed-rate mortgage, or change the loan term. This calculator helps you determine whether refinancing makes financial sense by comparing your current loan costs with potential savings from a new loan, accounting for closing costs and the breakeven period. Mortgage refinancing is one of the most impactful financial decisions a homeowner can make — even a 1% rate reduction on a $300,000 loan can save over $60,000 in interest over 30 years. However, refinancing is not always the right move: closing costs, extended loan terms, and how long you plan to stay in the home all affect whether you truly come out ahead. The key metric is the breakeven period — the number of months it takes for monthly savings to recoup closing costs. If you sell or refinance again before breakeven, you lose money. This tool also shows net savings after closing costs, so you can see the true long-term benefit. Keep in mind that refinancing resets your amortization schedule, meaning you start paying mostly interest again in the early years of the new loan.
How to Use
- Enter your current mortgage balance (what you still owe).
- Input your current interest rate and remaining loan term.
- Enter the new interest rate you could get by refinancing.
- Choose your preferred new loan term.
- Add estimated closing costs (typically 2-5% of loan amount).
- Click Calculate to see if refinancing saves you money.
Why Use This Tool?
Tips & Best Practices
- A rate drop of 1% or more often makes refinancing worthwhile
- Shorter loan terms save more interest but have higher payments
- Closing costs typically take 2-3 years to recoup
- Consider how long you plan to stay in the home
- Refinancing resets your loan term - you may pay longer
- Shop multiple lenders for the best rate and lowest closing costs
Frequently Asked Questions
When should I consider refinancing?
Refinance when interest rates drop significantly (typically 1%+ below your current rate), your credit score has improved, you want to change your loan term, or you need to remove PMI. Always calculate if savings outweigh closing costs within your expected time in the home.
What are typical refinancing closing costs?
Closing costs range from 2-5% of the loan amount ($4,000-$12,500 on a $250,000 loan). They include appraisal, title insurance, loan origination fees, and other processing costs. Some lenders offer 'no-closing-cost' refinancing with slightly higher rates.
How is the breakeven period calculated?
Breakeven = Closing Costs / Monthly Savings. If closing costs are $5,000 and you save $200/month, breakeven is 25 months. You start truly saving after 25 months. If you plan to move before breakeven, refinancing may not be worth it.
Should I refinance into a shorter term?
Shorter terms (15-year) have higher payments but save dramatically on interest. On a $250,000 loan at 6%, a 15-year term saves about $100,000 in interest vs 30 years, but monthly payments are about $600 higher. Choose based on your budget and goals.
What about cash-out refinancing?
Cash-out refinancing lets you borrow more than your current balance and receive the difference in cash. It's useful for home improvements or debt consolidation, but increases your loan balance and total interest. Consider carefully if it aligns with your financial goals.
What does this calculator NOT cover?
This calculator does not model PMI changes, adjustable-rate mortgage (ARM) scenarios, cash-out refinancing, credit score impacts on your rate, state-specific closing costs or taxes, home appreciation, or the opportunity cost of investing closing costs elsewhere. It also does not factor in the mortgage interest tax deduction. For a complete analysis, consult a mortgage professional.
Real-world Examples
Rate-and-term refinance: 7.5% to 6.0%
A homeowner with a $250,000 balance at 7.5% and 25 years remaining refinances to 6.0% for 30 years with $5,000 closing costs.
Balance: $250,000 | Current rate: 7.5% | Remaining: 25 yrs | New rate: 6.0% | New term: 30 yrs | Closing: $5,000
Current payment: $1,842/mo → New payment: $1,499/mo Monthly savings: $343 | Breakeven: ~15 months Net savings (after closing costs): ~$43,000
Shortening the term: 30-year to 15-year
A homeowner with a $200,000 balance at 6.5% and 22 years remaining refinances to a 15-year loan at 5.5% with $4,000 closing costs.
Balance: $200,000 | Current rate: 6.5% | Remaining: 22 yrs | New rate: 5.5% | New term: 15 yrs | Closing: $4,000
Current payment: $1,395/mo → New payment: $1,634/mo Payment increases $239/mo, but saves ~$95,000 in total interest Loan paid off 7 years sooner
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