Refinance Calculator

How This Calculator Works

Refinancing replaces your existing mortgage with a new one — typically to capture a lower rate, change the term, or pull cash out of accumulated equity. The math compares two scenarios side by side: keep paying off your current loan as-is, or pay closing costs today, take a new loan, and pay that off instead.

Two formulas drive the calculation. First, the standard amortization formula gives the monthly principal-and-interest payment for both the current loan (using remaining balance, current rate, remaining term) and the proposed new loan (using current balance plus any cash-out, the new rate, and the new term):

M = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ − 1 ]

Second, the break-even point is closing costs divided by monthly savings — the number of months it takes for the lower payment to recover what you paid the lender at closing. If your break-even is 36 months and you plan to sell or refinance again within three years, you'll never recover those costs.

The lifetime interest difference is the most honest number on this page. It compares total interest paid under each loan across its remaining term. A common gotcha: refinancing a 25-year-remaining loan into a fresh 30-year mortgage can lower your monthly payment but increase lifetime interest, because you've added five years of compounding back onto the schedule.

Understanding Your Results

The verdict pill at the top is a quick triage signal, but the underlying numbers tell the real story:

• Monthly savings is just the difference between your current and new monthly P&I. Positive means lower payment; negative means higher.
• Break-even tells you how many months until the cumulative savings equal what you paid in closing costs. Under 24 months is excellent; 24–48 months is solid if you plan to stay; over 60 months means you're effectively paying $4,500+ for a marginal improvement.
• Lifetime interest difference aggregates the entire remaining term. A positive number means you save in total interest — even after closing costs. A negative number means the lower rate is more than offset by re-extending the term, and refinancing actually costs you in the long run.
• Current vs new payment shows the cash-flow impact you'll feel each month.

A common pattern: a 7.5%-to-6.25% rate cut with a fresh 30-year term reduces the monthly payment by $200–$300 on a typical loan but only saves $20K–$40K in lifetime interest — because you've added years of payments. The same rate cut into a matched-term refi (replacing your 25-year-remaining loan with a 25-year new loan) saves less per month but far more lifetime.

If you're refinancing primarily to pull cash out, the math shifts: monthly savings may be negative because your new balance is higher, but you've also unlocked equity for a renovation, debt consolidation, or investment. Treat cash-out refi separately — judge it on what you do with the cash, not whether the monthly payment dropped.

Factors That Affect Refinancing Decisions

The headline rate is just the start. Several real-world variables determine whether a refi actually pays back:

The 0.75% rule (and its exceptions)

The classic rule of thumb is that refinancing pencils when the new rate is at least 0.75 percentage points below your current rate. The math behind it: on a typical $300,000 loan, 0.75% of rate equals about $150/month, which recovers a $5,000 closing-cost bill in roughly 33 months. Below 0.75%, the break-even usually stretches past most people's holding period. Above 1.0%, the case is usually obvious.

How long you'll stay in the home

This is the single most important variable and the one most homeowners ignore. If your break-even is 28 months and you sell in 24 months, you lost money on the refi. The cleanest test is to ask yourself honestly: would you be surprised to still be in this house five years from now? If yes, only short break-even refis make sense.

Term reset vs matched term

Refinancing a loan with 23 years remaining into a fresh 30-year mortgage adds seven years of payments — even at a lower rate, that can wipe out the lifetime savings. Most lenders also offer 15-year, 20-year, and "match my remaining term" options. The matched-term refi captures the rate cut without the schedule extension and is usually the optimal product for long-tenured homeowners with a meaningful rate gap.

Closing costs and "no-cost" refis

Real closing costs typically run 2–5% of the loan amount: origination, appraisal, title insurance, escrow setup, recording, and prepaids. A "no closing cost" refinance isn't actually free — the lender either rolls the costs into the loan balance (increasing your interest) or charges a higher rate (typically 0.25–0.5% more). Sometimes that's the right trade if you'll move within a few years; sometimes it isn't.

Mortgage insurance dynamics

If your current loan has PMI (conventional) or MIP (FHA), refinancing into a conventional loan with 20%+ equity eliminates that monthly insurance fee. That alone can be $100–$300 per month of "savings" that doesn't show up in a pure rate-cut analysis. Worth running the numbers if you've built meaningful equity since purchase.

Cash-out limits and loan-to-value

Conventional cash-out refinances typically cap at 80% LTV; FHA cash-out at 80%; VA cash-out at 100%. Above those thresholds you'll either need to bring cash to close or accept a higher rate. The new loan amount also affects the closing costs (they're a percentage of the new balance), so cash-out refis usually have higher absolute closing costs than rate-and-term refis.

Adjustable-rate exit strategies

If you have an ARM that's approaching its first reset, refinancing into a fixed-rate is often justified at break-even points that would otherwise be too long — because the alternative isn't your current ARM rate, it's the post-reset ARM rate that could be 1–3% higher. Model the worst case before deciding to ride the reset.

Tax deductibility of mortgage interest

Mortgage interest on up to $750,000 of acquisition debt is deductible if you itemize. Most households take the standard deduction post-TCJA, so the interest savings on a refi flow directly to your pocket without a tax offset. If you do itemize, factor the lost deduction into your real after-tax savings — typically 22–35% of the headline interest figure.

Frequently Asked Questions

Next Steps

If the break-even and lifetime numbers look favorable, your next moves are:

• Mortgage Calculator — model the new loan's full PITI to make sure the proposed payment actually fits the budget.
• Closing Costs Calculator — get a more granular estimate of refinancing costs by loan type.
• HELOC Calculator — compare cash-out refi against a HELOC if you're after equity.
• Types of Mortgages — review whether the loan product you're refinancing into is the right one.
• Homeowners Insurance Explained — refinances often trigger a new insurance binder; this is a good moment to shop the policy.