How to Use the Refinance Calculator
- Enter your current balance, current rate and the years left on the loan.
- Enter the new rate and term you were quoted.
- Add the total closing costs from your Loan Estimate.
- Choose whether you will pay the costs at closing or roll them into the loan.
- Press Calculate and compare the break-even point with how long you plan to stay.
Formula
Payment = L × r ÷ (1 − (1 + r)^−n) Monthly savings = current payment − new payment Break-even (months) = closing costs ÷ monthly savings Lifetime savings = remaining current payments − (new payments + upfront costs)
Example Calculation
You owe $280,000 at 7% with 27 years left (payment about $1,926). Refinancing to 6% over 30 years with $6,000 in closing costs paid in cash lowers the payment to about $1,679, saving roughly $247 a month. Costs are recovered in about two years. Because the new term is three years longer, interest over the whole period still comes out slightly lower in this case, but compare totals before deciding.
What Is a Refinance Calculator?
A refinance calculator compares two loans: the one you have and the one you could have. The key output is not the lower payment but the break-even point, the month when cumulative savings equal what you paid to refinance.
Factors That Affect the Result
The rate gap matters, but so do closing costs, which are commonly a few percent of the loan. The remaining term also matters: refinancing a loan that is already far along into a fresh 30-year term gives you a low payment but restarts the heavy-interest early years.
When Refinancing Tends to Make Sense
- Your rate can drop meaningfully and you plan to stay past the break-even date.
- You want to move from an adjustable rate to a fixed rate for stability.
- You can shorten the term without straining your budget.
- You can remove mortgage insurance by refinancing at a lower loan-to-value ratio.
Tips
- Get at least three Loan Estimates and compare the total cost, not only the rate.
- Ask for a no-closing-cost quote and compare its higher rate to the paid-cost option.
- Keep paying your current mortgage until the refinance closes.
Common Mistakes
- Ignoring the longer term and focusing only on the new payment.
- Forgetting that a prepayment penalty may apply to the old loan.
- Refinancing repeatedly and paying fees each time.
To model a new purchase instead, use the mortgage calculator.