Refinance Calculator

Assumptions

• Both loans are fixed-rate and fully amortizing. Interest is charged each month on the remaining balance, the monthly rate is the annual rate divided by 12, the number of payments is the term in years times 12, and each payment is made at the end of the month.
• Your current monthly payment is derived by amortizing the current balance over the years remaining at the current rate. If you enter a payment override above 0, that figure is used instead for the monthly savings and break-even, but lifetime interest saved still uses the derived amortization, so an override does not move it. An override below the interest-only amount is unrealistic and will distort the comparison.
• The base loan is your current balance plus any cash-out. Cash-out is added to the new loan only, not your current one, so it raises the new payment and the new loan's interest.
• Discount points are an optional fee paid to lower the rate. The fee is the points percent times the base loan (current balance plus cash-out), not the rolled-in total, so the definition is not circular. It is treated as a cost alongside closing costs.
• If you roll closing costs into the loan, the closing costs and the points fee are added to the new principal, which raises the payment and the lifetime interest. If you do not roll them in, they are paid upfront.
• Break-even is the upfront cost (closing costs plus points, when paid upfront) divided by the monthly savings, rounded up to a whole month. When you roll those costs into the loan, nothing is paid upfront, so the break-even is 0 months. That 0 means there was no upfront cost to recoup, not that the refinance pays for itself instantly; the cost instead shows up as a higher payment and lower lifetime savings. If the new payment is not lower, there is no break-even.
• Lifetime interest saved is the interest remaining on your current loan minus the total interest on the new loan. It can be negative, because restarting a longer term can raise total interest even at a lower rate.
• Net lifetime savings is the lifetime interest saved minus closing costs and points, whether you pay them upfront or finance them into the loan. Cash-out is not subtracted, because it is money you receive and then repay through the loan.
• All figures are in nominal dollars and are not adjusted for inflation, and the comparison does not account for the time value of the upfront cost beyond the simple break-even count.
• Each month's interest is rounded to the nearest cent (half up), and the final payment absorbs any leftover rounding so the balance ends at exactly zero.
• Not modeled: property taxes, homeowners insurance, PMI, and HOA dues; the tax deductibility of mortgage interest or points; rate changes over time; and extra or early payments. The payments shown are principal and interest only.
• This is an estimate for educational purposes only, not financial, legal, or tax advice. Your lender's figures will differ, and closing costs, points, and rates vary by lender. Consult a qualified professional and your lender for numbers specific to your situation.

Frequently asked questions

When does refinancing make sense?

Refinancing usually makes sense when the new rate is low enough that your monthly saving recoups the closing costs well before you plan to sell or refinance again, and when you are not extending the term so far that you pay more total interest. Compare the break-even months and the lifetime totals, not just the rate.

What is the break-even point on a refinance?

It is how many months it takes for your monthly savings to add up to the closing costs you paid. If closing costs are $4,000 and you save $200 a month, the break-even is 20 months. Past that point the refinance is saving you money.

Can refinancing cost more even at a lower rate?

Yes. Restarting a 30-year term resets you to the interest-heavy early years, so a lower rate spread over a longer term can still raise your total interest. This calculator shows lifetime interest saved, which can be negative, so you see the full picture.

Should I roll closing costs into the loan?

Rolling closing costs and points into the loan means you pay nothing out of pocket, so there is no upfront cost to recoup and the break-even shows as 0 months. The tradeoff is a larger loan: your new payment is a little higher and you pay more interest over the life, which is why the net lifetime savings is lower than paying upfront. Paying upfront recoups over the break-even months but keeps the loan and payment smaller. Compare the net lifetime savings under both choices.

What are discount points?

Discount points are an optional upfront fee paid to the lender to lower your interest rate. One point is one percent of the loan amount. This calculator computes the points fee as the points percent times your base loan (current balance plus cash-out) and counts it as a cost, either paid upfront or rolled into the loan. Whether points are worth it depends on how long you keep the loan: the lower rate has to save more than the points cost before you sell or refinance again.

Related calculators

• Mortgage Calculator
• Home Affordability Calculator
• HELOC Calculator