Quick answer: A refinance calculator compares your current mortgage with a new loan: it shows your monthly savings and the break-even point where savings cover the closing costs. Example: refinancing $250,000 from 7.5% to 6% saves $348.60/month and breaks even in 14.3 months on $5,000 of closing costs.
Last reviewed: October 2026
Key facts
- Compares current payment vs new payment on the same remaining balance.
- Break-even = closing costs ÷ monthly savings.
- Refinancing only wins if you keep the loan past the break-even month.
- A longer new term can lower the payment while raising lifetime interest: check both.
A refinance calculator compares your current mortgage against a new loan: monthly payment = balance × r(1+r)n ÷ ((1+r)n − 1) for each loan, monthly savings = old payment − new payment, break-even = closing costs ÷ monthly savings. This free refinance calculator shows whether refinancing pays off and when.
Enter your remaining balance, current rate and years left, then the new loan's rate, term and closing costs. The calculator shows both payments, your monthly savings, the break-even month and lifetime interest for each loan so you can judge the full trade-off.
How to use
- Enter your remaining balance, current rate and years left.
- Enter the new rate, new term and closing costs.
- Click Calculate to see monthly savings and the break-even point.
- Only refinance if you will keep the loan well past break-even.
Refinance formulas
| Term | Meaning |
|---|---|
| Monthly payment | P × r(1+r)n ÷ ((1+r)n − 1), r = monthly rate, n = payments left. |
| Monthly savings | Current payment minus new payment. |
| Break-even | Months until cumulative savings cover closing costs. |
| Lifetime interest | Total of all payments minus the balance. |
Worked examples
Rate drop refinance
$250,000 balance, 7.5% with 25 years left vs 6% 30-year with $5,000 closing: payment drops from $1,847.48 to $1,498.88; monthly savings = $348.60; break-even = 14.3 months.
Small rate drop, high costs
$250,000 balance, 6.5% with 25 years left vs 6.25% for 25 years with $8,000 closing: savings are only $38.84/month, so break-even stretches to 17.2 years: refinancing is not worth it unless rates fall further or you stay put for decades.
When refinancing makes sense
| Situation | Verdict |
|---|---|
| Rate drops 1%+, break-even under 2 years | Usually worth it |
| Break-even 2-5 years, staying long term | Often worth it |
| Break-even beyond your moving horizon | Skip it |
| New term restarts the 30-year clock | Compare lifetime interest, not just payment |
Frequently asked questions
What is the break-even point on a refinance?
The month when your accumulated monthly savings equal what you paid in closing costs. With $5,000 in costs and $348.60/month savings, break-even is 14.3 months; every month after that is pure savings.
How much does refinancing cost?
Closing costs typically run 2 to 5% of the loan amount: lender fees, appraisal, title insurance and prepaid items. On a $250,000 loan that is roughly $5,000 to $12,500.
Can a lower payment still cost more overall?
Yes. Stretching a 25-year remaining term into a fresh 30-year loan can raise lifetime interest even as the payment falls. Always compare total interest, not just the monthly number.
What credit score do I need to refinance?
Conventional refinances generally want 620+, with the best rates around 740+. FHA and VA refinances can go lower. Your rate quote depends heavily on score and loan-to-value.
Should I roll closing costs into the loan?
You can, but it raises your balance and your break-even stretches out. Paying costs in cash keeps the math cleanest; the calculator assumes cash-paid costs.
How much lower does my rate need to be for refinancing to be worth it?
As a rule of thumb, refinancing usually pays when the new rate is at least 0.5 to 1 percentage point lower than your current rate and you will keep the loan past the break-even month. The rate gap alone is not enough: a small drop on a small balance may never repay $5,000 or more in closing costs, so always divide closing costs by monthly savings and compare the result with how long you plan to stay.
What is a no-closing-cost refinance?
A no-closing-cost refinance rolls the closing costs into the loan balance or into a slightly higher interest rate instead of charging them upfront. You pay nothing at closing, but you borrow more or pay more interest over time, so the break-even idea changes: compare the higher payment or balance against a standard refinance before choosing it.
Related: Rent vs Buy Calculator: Break-Even Year Compared
Sources
- Consumer Financial Protection Bureau: mortgage refinance guidance
- Federal Housing Finance Agency: mortgage rate and refinance data
Key takeaways
- Break-even = closing costs divided by monthly savings.
- Refinance only if you will hold the loan well past break-even.
- A lower payment can still mean more lifetime interest on a longer term.
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