Mortgage Refinance Calculator

Your mortgage payment feels permanent, but it's really just math, and math can be rewritten. When rates drop, refinancing can shave hundreds off your monthly payment, but closing costs and a reset loan term can quietly eat those gains. This refinance calculator lays both sides bare: your current payment next to the new one, your monthly savings, the exact break even month when the refinance starts paying for itself, and the total interest each path costs, so you can see when a refinance pays off and when it's a trap.

Last updated: October 22, 2026

Written by Ateeq Fareedi · Last updated October 22, 2026

The formula

Monthly payment (standard amortization): M = P × r(1+r)^n / ((1+r)^n − 1), where r = annual rate ÷ 12 and n = total payments
Monthly savings = current monthly payment − new monthly payment
Break even months = closing costs ÷ monthly savings
Remaining interest on old loan = (current payment × payments left) − current balance
Total interest on new loan = (new payment × new term payments) − current balance
Interest saved = remaining interest on old loan − total interest on new loan
Net lifetime savings = interest saved − closing costs (closing costs subtracted only once)

A worked example

A homeowner owes $320,000 on an ARM that has just adjusted to 8.75%, with 26 years left, paying $2,603.15 a month and facing $492,182.80 of remaining interest. Refinancing into a fixed 30 year loan at 7.40%, the October 2026 average (Freddie Mac), cuts the payment to $2,215.62, saving $387.53 every month, with total interest of $477,623.20 over the new term. That means $14,559.60 of interest saved against $6,000 of closing costs, a break even of 15.48 months, and $8,559.60 of net lifetime savings after costs, worth it for anyone planning to stay well past a year and a half.

More about the Mortgage Refinance Calculator

What refinancing actually does

It swaps your current mortgage for a brand new loan, usually a different rate, term, or both.

The old loan gets paid off in full, and you start over with a fresh amortization schedule.

People refinance to lower the monthly payment, pay less total interest, shorten the payoff, or move from adjustable to fixed.

The five inputs that drive everything

Current balance means what you still owe, not the original loan amount or the home's value.

Your current rate and remaining term set the baseline you're comparing against.

The new rate, new term, and closing costs decide whether the deal actually helps you.

Reading the monthly payment and savings

Monthly payment uses the standard amortization formula and covers principal and interest only.

Monthly savings is just old payment minus new payment, the number your budget actually feels.

A big savings figure can hide a longer term, so always read it alongside total interest.

Break even: the number that matters most

Divide closing costs by monthly savings, that's how many months until the refinance pays for itself.

Before that month, the refinance is still costing you money; after it, every month is pure gain.

Only refinance if you'll stay in the home well past break even, ideally several years.

Total interest: the hidden side of a lower payment

Stretching the term restarts the amortization clock, so early payments are mostly interest again.

In this example the rate drop is big enough that total interest still falls by over $21,000.

With only a small rate drop, a longer term could cost more interest overall despite the lower payment.

Mistakes to avoid before you sign

Don't refinance right before selling or refinancing again. You may never reach break even.

Get at least three lender estimates; closing costs vary wildly for the same rate.

Factor in real life: a job change, a move, or an adjustable rate reset can flip the math overnight.

Cash out refinance to buy out a spouse in divorce

A divorce buyout refinance replaces the joint mortgage with a new loan in one name and uses the cash out side to pay the departing spouse their share of the equity. The maths: equity is the home's value minus the mortgage balance, and each spouse typically owns half. On a $500,000 home with a $300,000 mortgage, the equity is $200,000, so the buyout refinance is $300,000 plus $100,000, a new $400,000 loan, and the home stays put.

Two checks before you commit. First, you must qualify for the new, larger loan on your income alone, run it through a mortgage calculator at today's rates, not the rate on the loan you are replacing. Second, compare against selling: selling costs roughly 6% to 8% in agent fees and closing costs, which on that $500,000 home is $30,000 to $40,000 split between you, often far more than the refinance closing costs, which is why the buyout usually wins if the solo payment is genuinely affordable.

How to use the Mortgage Refinance Calculator

Enter your current loan balance, current rate, and the years left on your loan.
Enter the new rate, the new loan term, and the closing costs you were quoted.
Hit Calculate to compare payments, monthly savings, and total interest side by side.
Weigh the break even month against how long you plan to stay, then decide.

Frequently asked questions

When is refinancing worth it?

Three things decide it: how much lower the new rate is, how long you'll stay, and what the refinance costs. A good rule of thumb is to recover closing costs within about two years, and plan to stay a few years beyond that. If a move is on the horizon, the savings may never show up.

What do closing costs actually include?

Typically 2% to 5% of the loan amount, covering lender origination fees, appraisal, title insurance, and recording charges. Many lenders let you roll these into the new loan balance, no cash out of pocket, but you pay interest on them. A "no closing cost" refinance just hides the fee inside a slightly higher rate.

How long does a refinance take?

Most rate and term refinances take 30 to 60 days from application to closing, about the same as a purchase loan. Delays usually come from appraisal scheduling, income verification, or underwriting backlogs. If rates are falling, ask your lender about a rate lock and what an extension costs.

Does refinancing hurt my credit score?

Only briefly. Refinancing triggers a hard inquiry that dips your score a few points, but steady on time payments on the new loan rebuild it within months. Several applications in a short window count as rate shopping, so don't drag the process out over half a year.

Does this include taxes and insurance?

No. Both sides of this comparison cover principal and interest only, so property taxes and homeowner's insurance are left out. If your lender escrows those, your real monthly bill will be higher, but the savings gap between old and new payments stays the same. Enter balance, rates, and terms as the calculator asks, not your escrow total.

Why does the break even point matter so much?

It's your minimum stay. Until that month passes, you're still paying off the cost of refinancing, sell or refinance again before then and you lost money on the deal. After break even, every month is pure savings, which is why a long planned stay makes refinancing so much more attractive.

Does refinancing reset my loan term?

Usually yes, and it's the hidden cost most people miss. Refinancing a mortgage with 20 years left into a fresh 30 year loan cuts the monthly payment but adds 10 years of interest, and you can end up paying more total interest despite the lower rate. Compare total interest across both loans, not just the monthly payment; refinancing into a 20- or 15 year term sidesteps the reset trap.

How do I calculate the refinance break even point by hand?

Divide your total closing costs by your monthly payment savings. With $4,500 in closing costs and $180 a month in savings, break even is 25 months: $4,500 ÷ $180 = 25. Sell or refinance again before that month and the refinance cost you money; after it, every month is net savings. The calculator above runs the same division from your current and new loan figures automatically.

Can refinancing remove my PMI?

Often yes. If your home has gained value and you now owe less than 80% of what it's worth, refinancing into a conventional loan can drop the mortgage insurance entirely. That's a genuine monthly saving on top of any rate benefit. Check your current balance against a realistic home value first, then use the calculator above to compare your full old payment with the new one.

Is it cheaper to roll closing costs into the new loan or pay them upfront?

Paying upfront is cheaper in total interest, because rolling costs in means you pay interest on them for the life of the loan. Rolling them in does make the refinance easier at the closing table. You just get less equity and a slightly higher payment. If cash is tight, rolling is a fair trade; if you have the savings, paying upfront usually wins. The calculator above can show both versions so you can compare them side by side.

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